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DEPARTMENT OF AGRICULTURAL ECONOMICS 
UNIVERSITY OF ILLINOIS 

AGRICULTURAL EXPERIMENT STATION 



ILLINOI 



AGRICULTURAL 



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JUL 2? 



1964 



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ARTICLES IN THIS ISSUE: 



JULY, 1964 

VOLUME 4, NUMBER 2 



The Emerging Structure of U.S. Agriculture: 
Traditional or Industrial? 
Harold F. Breimyer Page 1 

Should Workmen's Compensation Apply 

to Illinois Farmers? N. G. P. Krausz Page 7 

Educational and Vocational Needs 
of Rural Youth: A Pilot Study, 
D. E. Lindsfrom Page 1 1 

Soil Loss Tolerance and the Economics 
of Soil Conservation on Swygert Soils, 
C. E. Harshbarger and E. R. Swanson . . . .Page 18 

Methods of Agricultural Price Support 
and Stabilization in Australia, 
Jock N. Lewis Page 29 



The increasing industrialization of U.S. agricultural production 
and marketing has two aspects: the purely technical one of 
increased mechanization and improved control over biological 
production processes, and the role of institutions by which agri- 
culture is organized into a coordinated system. The author of 
the first article offers suggestions on how the technical aspect 
might continue its contribution while maintaining the essential 
features of the present system of organization. 

Workmen's compensation, an aspect of an industrial agri- 
culture, is treated in the second article. The workmen's com- 
pensation act in Illinois is essentially an insurance system to 
compensate employees for work-connected injuries. Illinois 
farmers may choose to come under the act and thus gain limited 
liability in the event an employee is killed or injured. Since the 
employer pays for workmen's compensation, this cost should be 
compared with commercial employee's liability insurance. 

Another facet of the industrialization process in agriculture 
is the dwindling number of opportunities for farm-reared youth 
to farm. Many of the young people who take non-farm jobs 
are handicapped by lack of education. The third article 
reports on a pilot study of the educational needs of rural 
youth in Illinois. College plans of high school students were 
related to personality traits and educational achievement 
scores. As might be expected, those planning to go to college 
rated higher on educational achievement. Occupational aspi- 
rations held by students are also reported. 

A number of studies have been made of how soil conser- 
vation practices affect farm income. When actual farms are 
studied it is difficult for the research worker to isolate the effect 
of soil conservation on income. Even if size of farm and soil 
type are held constant many other factors influence farm-to- 
farm variation in income — management ability, use of ferti- 
lizers, amounts of livestock, etc. An alternative method of 
analysis is to use soil-loss data as a basis for calculating yield 
losses. This method was used in the study reported in the 
fourth article. The results indicate that farmers on Swygert soils 
sacrifice income by adopting rotations that keep soil losses 
within recommended tolerances. 

A study of Australian agricultural price policies is presented 
in the final article. The classification of these policies is useful 
not only as a study of the Australian situation, but it gives us a 
basis for studying U.S. policies and making interesting compari- 
sons. A broad classification into three groups is used — 
measures to control or influence supply, measures to influence 
demand, and measures to directly augment prices. Patterns 
appearing in the Australian experience include a strong tend- 
ency toward programs of supply diversion, and the use of 
import duties and buffer or stabilization funds. 



ILLINOIS AGRICULTURAL ECONOMICS 



The Emerging Structure of U.S. Agriculture: 
Traditional or Industrial? 



HAROLD F. BREIMYER 



■ ARMERS, and most nonfarmers, are 
well aware of how the profile of U. S. 
agriculture is being resculptured. There 
are dozens of trends and developments 
that were unknown to our forefathers. 
Among them are attempts to organize 
farmers for mass bargaining power; 30 
years of government influence on use of 
land and on prices; producing poultry 
under vertical integration, which requires 
the farmer only to provide housing, keep 
feeders filled, and watch for trouble; new 
methods of marketing, such as food 
chains' direct buying in huge quantities; 
marketing under market-wide orders or 
agreements, as in fluid milk and western 
fruits and vegetables; consumers' insist- 
ence on quality inspection, and touchiness 
on cholesterol, chemical residues, etc.; 
strange new ways of fighting for foreign 
markets, marked by the first "chicken 
war" in history; and seemingly boundless 
productivity and persistent surpluses. 

These and other changes are readily 
observed. They are less readily under- 
stood. Questions are raised as to whether 
they have a common origin, what their 
future may be, and above all whether 
they promise a bright new era for our 
traditional agriculture, or its demise. 

Ironically, many of these questions are 
appearing just after a century of prog- 
ress in U.S. agriculture was widely cele- 
brated. Many of the research and 
educational services to agriculture are 
now a hundred years old. The Morrill 
(land-grant college) Act, the U.S. De- 
partment of Agriculture, a number of 



state universities, and the Homestead 
Act all recently marked their one- 
hundredth birthdays. Each has been 
dedicated to bringing productiveness and 
stature to U.S. farms — farms organized 
primarily as individual family units. 

The fruitfulness of the efforts of such 
institutions is well known. It is one of 
the world's success stories. As a result, 
the fear of food shortages which has 
haunted most peoples throughout history 
has vanished from the American scene. 
U.S. consumers, increasing in numbers, 
eat better than ever before and, almost 
miraculously, fewer farmers are needed 
to feed them. 

In addition, the competence and status 
of the family farmer have been lifted. 
From the slave, the serf, and the medie- 
val peasant has emerged the skilled, 
modern, family farmer. This achieve- 
ment is a great tribute to the educational 
and other institutions which were instru- 
mental in bringing it about. 

Although perhaps less appreciated to- 
day, farming and the rural community 
in the United States doubtless con- 
tributed also to the stability and sense of 
responsibility in citizenship that Thomas 
Jefferson saw as a bulwark to democracy. 

If the record is so good, why is our 
agricultural system now challenged? In 
what way, if any, does it now fall short ? 

Agriculture in an Industrial World 

Probably the common chord to all the 
trends named in the opening paragraph 
is the industrial component which is in- 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



creasingly entering into agriculture. Ours 
is ever more an urban-industrial age, 
and less an agrarian one. The character- 
istics of city life and of manufacturing 
and commerce are being imposed upon 
agriculture. The most critical decisions 
agriculture will make in future years will 
be concerned with the extent to which 
it will give way, versus the extent to 
which it will seek to retain its identity. 

Urban industry affects agriculture in 
many ways. It makes agriculture more 
technically complex. The farmer who 
once needed rather simple knowledge 
plus a strong back must now know the 
chemistry of soil nutrients, the mechanics 
of operating a combine, the accounting of 
filing his tax forms, and the economics 
of choosing the time to buy and sell his 
cattle. One moral from this is pretty ob- 
vious: If the farmer is to remain an 
independent manager, an "entrepreneur," 
he will need even more educational help 
than before. He will likely move even 
farther toward specialization, and he will 
require more specialized counsel in con- 
nection with it. 

But today's technology is more than 
know-how. It is new resources — indus- 
trially produced resources. Ancient farm- 
ing consisted chiefly of man on land. The 
farmer of the 20th century is still a man 
tilling land but he is sheltered and helped 
by an enormous panoply of machines, 
fuels, chemical fertilizers, herbicides, 
electric power, and other resources 
brought from outside the farm. The 
USDA Economic Research Service has 
estimated that as recently as 1940 about 
66 percent of all resources used in farm- 
ing were land and farm-resident labor. 
The remaining 34 percent were pur- 
chased capital inputs. By 1961 the ratio 
was almost reversed. Land and farm 
labor were down to 37 percent of total 
resources used and purchased inputs 
were 63 percent. This is an amazing 
change for so short a time. 



Often, these new resources are seen 
as merely making agriculture more pro- 
ductive. They do that. But from the 
standpoint of managing our agriculture, 
more important is the fact that they 
loosen many of the restraints on produc- 
tivity. Formerly, at any given time the 
supply of land and farm labor was limited 
and so, therefore, was output. But in- 
dustrial materials are available to agri- 
culture in almost unlimited supply. Con- 
sequently, the use of these materials has 
a decided effect on the volume of farm 
output. And the decisions as to the quan- 
tities of industrial goods to be used be- 
come, year in and year out, decisions as 
to what total farm output will be. 

In our system of agriculture, such 
decisions are made largely by individual 
farmers. Except for the effects of an- 
nual variation in weather, these farmers 
determine how much is to be produced. 
Even the cotton, tobacco, and similar 
government programs only influence the 
amount of acreage planted; they do not 
restrict other inputs. Thus, more man- 
agerial wisdom is required than ever be- 
fore if production is to be geared to the 
market with fair accuracy. A big ques- 
tion in farm policy is whether the tradi- 
tional institutions of agriculture are equal 
to the task. Can individual, independent 
farmers regulate the resources of agri- 
culture so as to provide amply for con- 
sumers without running into overproduc- 
tion and low prices? 

Although opinions on this question 
differ widely, a number of measures to 
help farmers meet their new and larger 
tasks have been proposed. Several are 
listed at the end of this article. 

Changes in Farm Markets 

Less noted but not less noteworthy 
have been the changes taking place in 
farm markets. Modern transport has 
brought the eclipse of some central whole- 
sale markets. Direct trading has often 



EMERGING STRUCTURE OF U.S. AGRICULTURE 



replaced them. Probably of more signifi- 
cance is the growth in size and power 
of the firms that sell to agriculture and 
buy from it. In some trade channels a 
few firms dominate. The clearest exam- 
ple of change is in retailing, where small 
grocery stores have given way to super- 
markets and various corporate and vol- 
untary chains. 

Large market firms offer a contrast 
with the smallness of individual farms. 
This difference introduces the spectre of 
such firms being able to exert unwar- 
ranted market power. An issue of this 
kind must be dealt with case by case, 
not in generalities. On the other hand, 
market firms are becoming more exact- 
ing in their demands upon agriculture. 
Those firms are providing ever more 
servicing to farm products, and doing 
so through the use of techniques of mass 
handling and mass processing. As a con- 
sequence they are insisting that farm 
products be marketed in large quantities, 
in more standardized qualities, and on a 
more regular time schedule. In other 
words, they are resisting the lack of 
order which characterizes the seasonal 
production of farm products of uncertain 
quality in unpredictable quantity on sev- 
eral million scattered farms. 

Agriculture's Institutions 
of Coordination 

All this is not wholly new. For two 
centuries a contrast, if not conflict, has 
been evident between the ways industry 
and agriculture are constituted. But the 
differences have become more apparent 
recently. And some policy issues are 
coming into more prominence. 

Moreover, U.S. agriculture has long 
devised means to grapple with the pres- 
sures and precedents arising in the indus- 
trial, nonfarm world. The typical farmer 
likes to declare how independent he is. 
The claim is something of an illusion. 



The farmer has long joined informally 
with his neighbors in exchanging work 
at harvest season and on special occa- 
sions such as a barn raising. He has 
looked to government to build roads so 
he could reach his market. In recent 
years, many means have been developed 
(formal and informal, private and pub- 
lic) to bridge the gap between the inde- 
pendence of the individual farm and the 
complexities of the modern economy. 

Farmers draw on research and exten- 
sion services for vital knowledge. They 
utilize commercial farm management 
services. They get electric power from 
rural electric cooperatives, and sometimes 
telephone service too. They obtain help 
from the local soil conservation district 
in protecting their soil. They spend al- 
most a billion dollars a year for custom 
work. They may buy and sell through 
farmer cooperatives, whose total business 
is increasing. Some farmers sell their 
product at prices negotiated by one of 
the 325 bargaining associations now in 
existence. 1 The list could go on and on. 

Almost certainly, if U.S. agriculture 
is to hold to its traditional makeup of 
independent units it will have to utilize 
existing institutions to that purpose, or 
even form some new ones. 

Or, agriculture can move down one 
of two other paths — horizontal com- 
bination into super farms, or vertical 
integration. These too can be regarded 
as contributions of industry to agricul- 
ture. They are industry's managerial 
tools, transferable to agriculture. 

The combining of individual farm 
units into large corporation-style organ- 
izations, on an extensive scale, would 
convert agriculture into a few thousand 
big-business operations. In its financing 

1 J. Kenneth Samuels, Bargaining Activities 
in Other Commodities. Proceedings o£ Fifth 
National Conference on Fruit and Vegetable 
Bargaining Cooperatives. U.S. Dept. Agr., 
FCS. p. 49. Jan., 1961. 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



and management such an agriculture 
would be patterned after corporate busi- 
ness. Each large "farm" would have a 
board of directors, several layers of ad- 
ministrative officials, and wage-earning 
employees of various skill categories. 
There might even be a director of public 
relations, an advertising budget, and 
other trappings of modern business that 
have been almost absent from agriculture. 

Some spokesmen for agriculture both 
foresee and welcome a system of this 
type. Their argument is that an agri- 
culture of mammoth units would be able 
to manage its affairs for higher and 
more stable returns than are now re- 
ceived. 

Opinions vary as to how much large- 
scale agriculture now exists. Some ex- 
amples are quite obvious. One of the 
best known is the larger-sized, commer- 
cial feedlot for cattle. Several land 
companies have huge holdings, although 
they often sublease them rather than 
operate them directly. 

The U.S. Department of Agriculture 
tends to minimize the extent of large- 
scale farming in agriculture today. The 
National Agricultural Advisory Com- 
mission, a presidentially appointed body 
that is advisory to the Secretary of Agri- 
culture, recently issued a statement re- 
assuring that most farming is still family 
farming. 2 A special census study pre- 
sents a somewhat different picture. It 
shows the number of farms with sales 
of $100,000 or more in 1959. The figure 
is arbitrary and does not distinguish ex- 
actly between family farms and larger- 
than- family farms. Nevertheless the data 
are of interest. In 1959 almost 20,000 
farms exceeded $100,000 of sales. Their 
total sales accounted for 16.9 percent of 
sales from all commercial farms. For 



2 The Family Farm in American Agricul- 
ture, A Report of the National Agricultural 
Advisory Commission. USDA mimeo. Nov., 
1963. 



six major products they represented a 
fourth or more of all commercial sales: 
sugarcane, 58 percent; vegetables, 47 per- 
cent; forest products and horticultural 
specialities, 40 percent; fruits and nuts, 
32 percent; potatoes, 30 percent; and 
rice, 25 percent. 3 

Whatever uncertainty there may be 
about horizontal combination into super 
farms, there is none about the growth of 
the various contractual arrangements 
known as vertical integration. They have 
come on the farm scene by leaps and 
bounds. According to Prof. E. P. Roy, 
Louisiana State University, about 95 
percent of all broilers in the United 
States are grown under some type of 
vertical integration. The production may 
be under contract or on company-owned 
farms. About 95 percent of hatching 
eggs, 35 percent of table eggs, 85 percent 
of turkeys, 10 percent of hogs, and 30 
percent of fed cattle are produced under 
similar arrangements. Most vegetables 
for canning or freezing are produced 
under contract or on the processor's land 
(leased or owned). Marketing contracts 
with cooperatives characterize the mar- 
keting of much milk and citrus fruit. 4 

It is necessary to distinguish between 
mere advance selling on contract, as of 
feeder calves, and vertical integration of 
a more sweeping nature. The latter is dis- 
tinguished by two features: it (a) trans- 
fers much of the managerial authority 
of the farmer off the farm, and (b) sets 
returns to farmers according to terms 
of the contract rather than according to 
market prices. In cases of outright own- 
ership a labor contract may be used. 
Farmers are generally more sensitive to 
the change in managerial status, than to 
changes in marketing. Farm organiza- 

3 Large Scale Farming in the United States, 
Census of Agr., 1959. U.S. Bur. of Census, 
Special Rpts., Vol. 5, Part 7. May, 1963. 

4 Ewell Paul Roy, Contract Farming U.S.A. 
Interstate Press, Danville, 111. pp. 11-12. 1963. 



EMERGING STRUCTURE OF U.S. AGRICULTURE 



tions, for example, have deplored reduc- 
ing the farmer's managerial role. It is 
possible that the loss of a market system 
for determining prices of products, and 
thereby the rewards to farmers for their 
productive effort, is the more significant 
aspect. A market exchange system, built 
up over centuries, has pronounced merits. 
Unlike negotiation of the terms of a 
contract, market pricing is aided by a 
number of measures to bring buyers and 
sellers together, to provide information 
by means of market news, and to regulate 
trading practices in the interests of both 
buyers and sellers. To date similar pro- 
tections have been lacking in most con- 
tractual negotiation. 

Possible Directions to Take 

Which of several possible directions 
U.S. agriculture will take will depend in 
large measure on what actions, both pub- 
lic and private, are chosen to influence 
them. Assuredly, the methods of produc- 
tion will acquire ever more industrial 
characteristics. The moot issue is 
whether agricultural institutions (the 
way agriculture is organized and man- 
aged) will go the same route. Chances 
are that in the absence of specific action, 
they too will drift into industrial forms. 

Decisions will be made not so much 
on economic as on other grounds. To a 
large extent they will be based on what 
kind of agriculture and rural life is de- 
sired for its own sake. Few research 
data are to be found on whether a differ- 
ent kind of agriculture would be more 
productive than the traditional kind. Yet 
it seems that productivity is so high, and 
resources are so great, that any of several 
forms of organization would provide 
adequately — even though not equally — 
for the food and fiber needs of our con- 
suming population. The test is not so 
much economic as what our other goals 
and values may be. 



If the public decision should be to 
preserve traditional agriculture in prefer 
ence to an agriculture organized along 
the lines of industry, several courses of 
action lie open. Some would be private, 
and others would require either enabling 
authority or direct help from govern- 
ment. The following are presented as 
examples from which selection could be 
made. They are a partial catalogue, not 
a blueprint. No one of the measures, 
singly or combined, will change the tech- 
nology of agriculture in a radical man- 
ner, nor will it arrest the steady pressure 
for more regular and orderly marketing 
of farm products. Most measures would 
be compromises. They would reconcile the 
more industrial character of agricultural 
production with some of the time-honored 
institutions of agricultural organization. 

1. Step-up in educational services to 
farmers. More of such services would 
be on-the-farm, and they would fre- 
quently be highly specialized and include 
detailed managerial counsel. Some would 
be private and some public, but experi- 
ment stations and extension services 
would likely continue to anchor them, 
chiefly in the interest of third-party 
objectivity. 

2. Better sources of financial capital 
to farmers. It would be ideal if more 
equity capital could be brought into agri- 
culture under terms that allowed man- 
agerial responsibility to remain within 
agriculture. 

3. New arrangements for farm own- 
ership and tenure. A recent article in 
Illinois Agricultural Economics called at- 
tention, for example, to "growth in farm 
operating partnerships, farm family cor- 
porations, and multiple-landlord, tenant- 
operated farms." 5 A well-financed tenant 
who holds an equitable rental contract 

8 F. J. Reiss, R. C. Hughes, and G. G. Judge, 
Changes in Farm Tenure : A Markov Process 
Analysis. 111. Agr. Econ. 3(2) :10. 1963. 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



may be a sounder position than an owner- 
operator on a farm with too small an 
acreage and too big a debt. Farmers and 
farm families may need to revise their 
age-old goal of debt-free, full ownership. 
At present dollar costs of land the human 
cost of that goal may be too high. It may 
require too much sacrifice by the farm 
family. 

4. New or enhanced forms of farmer 
cooperation. Some persons believe that 
this holds bright promise. Farmers would 
retain their managerial control over their 
farm operations but would depend on 
pooled selling. Purchasing would likely 
be similarly combined. This avenue 
would call for some new concepts of the 
nature and form of cooperation. It might 
require more legislative authority, care- 
fully spelled out according to the terms 
and limits to its use. 

5. Cooperative marketing under or- 
ders and agreements. Experience shows 
this aid to marketing to be of value under 
certain conditions. To date it has ap- 
peared best suited to specialty crops. 
Whether it is adaptable to some livestock 
products is not clear, but it is probably 
better suited to them than to field crops. 
Whatever the boundary to their possible 
application, marketing orders and agree- 
ments have won their place in the roster 



of aids to the marketing of farm 
products. 

6. Cooperative bargaining associa- 
tions. The times and places to which 
these are applicable is also a matter of 
uncertainty. They probably offer more 
promise than their opponents will admit, 
but less than their proponents claim. 

7. Legal aids of various kinds. Here 
also the possibilities are too numerous 
for mention. As more contracts are used, 
legal protection of the terms of contract 
will almost surely prove necessary. The 
institutions of agriculture have long had 
the benefit of protective legislation, and 
they will continue to need that help. 
Legal "sideboards" may be the only 
feasible way to permit the kinds of agri- 
culture that are desired, and to forestall 
those that are not. 

These seven examples certainly do 
not exhaust the possible means of achiev- 
ing whatever the democratic decision- 
making process determines to be the 
desired makeup of U.S. agriculture. They 
are the ones that have been proposed 
most often by farm leaders, and by farm 
economists who have studied the nature 
and the meaning of the forces born of 
industry that are now pressing upon the 
traditional agriculture of the United 
States. 



SHOULD WORKMEN'S COMPENSATION APPLY TO ILLINOIS FARMERS? 



Should Workmen's Compensation Apply 

to Illinois Farmers? 

N. G. P. KRAUSZ 

IHE THEORY BEHIND workmen's illations below (death rates include fa- 
compensation acts is said to be: "The talities both on and off work site, and 
cost of the product should bear the blood disabling injuries are those which cause 
of the working man." The Illinois legis- more than one day of absence from 
lature enacted the first workmen's com- work). Estimates are based on informa- 
pensation law in 1911, modeling the act tion from " Accident Facts," published by 
after the British act of 1897. Basically the National Safety Council, 
the Illinois act provides for an insurance _. M . 

J-JCQlh YCL16S t)6T 

system to compensate employees for Industry 100,000 workers 

work-connected injuries. The act pro- Mining, other extractive 110 

vides for medical, surgical, and hospital Construction 73 

services, with fixed payments during tern- * fr^sportetion and Public Utilities '. 40 

porary disability, and an award in money Service and Government 15 

as compensation for permanent injuries Manufacturing 11 

j , i 1 rade 10 

or death. 

Most of the workmen's compensation Disabling 

acts in the states exempt employers of Industry Injuries 

agricultural labor from mandatory cov- %&£g^; -y- gggg 

erage. However, because of the high Trade 375,000 

farm accident rate in recent years, the ♦ Agriculture 280,000 

question again arises whether workmen's Construction . . ... . 210,000 

^ f . Transportation and Public Utilities 190,000 

compensation should apply to Illinois Mining, Quarrying, Oil 

farmers. and Gas Wells 45,000 

Farming parallels industry in the use Total 2,000,000 

of heavy and potentially dangerous ma- 
chinery. Statistics of the National Safety The Law in I,,inois 

Council bear this out. In 1962 there were Illinois law exempts farmers from the 

about 13,700 accidental deaths in all kinds mandatory application of the act. 1 How- 

of work in the United States. Almost e ^er, where a farmer owned a large tract 

one-fourth of these (3,100) involved of timber land and operated a saw mill, 

farm workers. retaining some lumber for his own pur- 

In Illinois an estimated 825 farm peo- pose and selling the rest, it was held that 

pie were killed in accidents in 1962. This the operation of the saw mill was within 

includes accidents on the farm, in the the comp ensation act and the exemption 

home, and off the farm (such as highway i « Nothing contained in this act shall be con- 
accidents). The on-farm fatal accidents strued to apply to any work, employment or 

in Illinois totaled over 100 for 1962, and operations done, had or conducted by farmers 

,. , ,. . ... . , and others engaged in farming, tillage of the 

disabling on-farm injuries were estimated soil> or stock raising> or t0 those who rent> 

to be 6,900. demise or lease land for any such purposes, or 

The accidental death rates and num- to an y° ne in their employ or to any work done 

, - j. ... ... . . -pro on a farm or country place, no matter what 

bers of disabling injuries for major U.S. kind of work or service is being done or ren _ 

industries in 1962 are shown in the tab- dered." 111. Rev. Stat, C. 48, s. 138.3(15). 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



did not apply. The Illinois Supreme 
Court pointed out that "it cannot be said 
that because a man is a farmer that fact, 
alone, exempts him from the operation of 
the Workmen's Compensation Act where 
he engages on his farm in an independent 
extra-hazardous occupation which is 
within the terms of the act." 2 

The court has been faced with difficult 
cases. In Hill v. Industrial Commission* 
a farmer owned a threshing outfit with a 
clover-hulling attachment, and while hull- 
ing clover for his neighbors one of his 
employees was injured. The injury was 
held not to be compensable under the 
Workmen's Compensation Act. 

In Seggebruch v. Industrial Commis- 
sion, 41 the employer owned a farm, a 
grain elevator, and a flour and feed store. 
He also retailed sand, gravel, and brick, 
and even ran a saloon. An employee did 
every kind of work except office work, 
and while he was unloading manure on 
the farm of the employer he was injured. 
The Supreme Court said that, although 
at times in the year he was engaged in 
extra-hazardous activities (running the 
elevator) , spreading manure did not bring 
him within the protection of the statute. 

The tendency toward a liberal con- 
struction of the farmers' exception under 
workmen's compensation is apparent 
from the Illinois Supreme Court decision 
in Noverio v. Industrial Commission. 5 
Here the employee of a man in the busi- 
ness of laying and repairing the tile lines 
on farms was said to be within the ex- 
ception even though the employee was 
injured while cutting a tile drain cover 
in his employer's basement. The courts 
said that "no work could be more funda- 
mentally a part of farming than drainage 
to put the soil in shape for cultivation. 

2 Peterson v. Industrial Commission. 315 111. 
199 (1924). 

3 346 111. 392 (1931). 
4 288 111. 163 (1919). 
5 348 111. 137 (1932). 



That the work was being done by one 
not engaged in general farming himself 
is immaterial. . . . The adjournment to 
the employer's basement was obviously to 
facilitate the completion of an integral 
part of the drainage system that was in 
process of installation on the farm and 
the character of the work was in no sense 
altered thereby." 

The extent of the exception can be 
best summarized by a statement in the 
syllabus to the Court of Claims case of 
Bunting v. State. 6 "All farm work done 
by farmers and others engaged in farm- 
ing, tillage of the soil or stock raising 
and all work done, which in its nature is 
a part of farming, or any work done on 
a farm or country place, no matter what 
kind of work or service is being done or 
rendered, is excepted from the provisions 
of the Workmen's Compensation Act." 

Other States 

Ohio is one of the few states of the 
union that has no agricultural labor ex- 
emption in its Workmen's Compensation 
Act. 7 Under the Ohio law, anyone who 
employs more than three persons must 
carry workmen's compensation. How- 
ever, the requirement that any employer 
(including farmers) must have at least 
three employees, in effect, is an exemp- 
tion for most farmers. Only the larger 
farm operators would come within the 
purview of the act. 

The decided majority of states have 
provided agricultural exemptions in their 
acts similar to the exemption in the Illi- 
nois act. However, interpretation of these 
exemptions may be more limiting in some 
of the nearby states. 

In Michigan "farm laborers" are ex- 
empted from the statute, but the Supreme 

6 11 111. Ct. Claims 181 (1938). 

' For a summary of the treatment given agri- 
cultural labor in the workmen's compensation 
acts of the different states, see 1 Larson, "The 
Law of Workmen's Compensation," sec. 53.10 
(1952). 



SHOULD WORKMEN'S COMPENSATION APPLY TO ILLINOIS FARMERS? 



Court of that state held that an employee 
of a farmer who owns a corn husking 
machine used at the time of injury on the 
farm of a neighbor, whether or not for 
hire, is not a farm laborer within the act 
of that state. 8 

The Indiana statute exempts "farm or 
agricultural laborers and employees. . . ." 
However, an Indiana court has held that 
"one who operates hazardous farm ma- 
chinery (in the case cited, a corn picker) 
on the farm of a farmer who is not his 
employer, under contract existing be- 
tween the farmer and his employer, is not 
a farm laborer." 9 

The situation in other north-central 
states, however, is similiar to that in Illi- 
nois. Minnesota law excludes "farm la- 
borers," and the Supreme Court of that 
state said that an employee operating a 
threshing machine was within the excep- 
tion. 10 Iowa has decided similar cases in 
the same way. ] 



11 



Illinois Election 

Even though farmers are exempt from 
mandatory coverage, it is still possible for 
them to elect to come under the act. This 
can be done by filing notice of such elec- 
tion with the Industrial Commission, or 
by insuring liability to pay compensation 
under the act with an insurance carrier 
authorized to do business in this state. 12 

If an employer elects to come under 
workmen's compensation, then every em- 
ployee is deemed to have accepted all the 
provisions of the act as a part of his 
employment contract. If the employee 
does not want to be covered, he can file a 
notice of his intention with the Commis- 
sion within 30 days after the date of his 

8 Roush v. Heffelbower. 225 Mich. 664, 196 
NW 185 (1923). 

e 127 Ind. app. 370, 141 NE2d 863 (1957). 

10 Bykle v. Dist. Court of Watonwan Co. 
140 Minn. 398, 168 NW 130 (1918). 

11 Sylcord v. Horn. 179 Iowa 936, 162 NW 
249 (1917). 

12 111. Rev. Stat. 1963. C. 48, s. 138.2. 



hiring. The Commission must immedi 
ately notify the employer of the rejection 
by the employee. After this lias been 
done, the measure of the employer's lia- 
bility for work-connected injuries will be 
determined without reference to the act. 
Such an employer would then be free to 
cancel any insurance policies purchased 
pursuant to the act. 

Also, employees can withdraw from 
the operation of the act by filing a notice 
with the Industrial Commission at least 
10 days before January 1 of any year. 
In the event the farmer would want to 
withdraw from the act, he could do so 
by filing a notice with the Commission at 
least 60 days prior to the expiration of 
any calendar year. 13 

Where the farmer has elected to come 
under the act by insuring his liability, he 
can withdraw from the operation of the 
act at the date of expiration or cancella- 
tion of the insurance policy. 14 

Assuming that an election to come 
under the statute has been made, there 
are three ways set out to insure payment 
of compensation. The employer can: 

1. File with the Commission an appli- 
cation for approval as a self-insurer. 
This application must show the financial 
statement of the employer. Whether or 
not the employer will be accepted as a 
self-insurer is at the discretion of the 
Industrial Commission, based on "finan- 
cial ability." 

2. Furnish security, indemnity, or a 
bond guaranteeing the payment by the 
employer of the compensation provided. 

3. Insure his entire liability to pay 
compensation to some insurance carrier 
licensed to do such business in Illinois. 15 

Advantages 

The following are advantages of work- 
men's compensation for farmers. 

13 Ibid. 

14 Ibid. 



15 



5 111. Rev. Stat. 1963. C. 48, s. 138.4. 



10 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



1. The employer's liability is limited. 
The Workmen's Compensation Act states 
what the maximum recovery could be. 
For example, the maximum for death 
would be $13,500 if the deceased had no 
children, and $17,500 if there were four 
or more children. There are limits for an 
injured employee, with elaborate sched- 
ules set out in the law. 16 

With a standard-type general liability 
policy, a court judgment may exceed the 
amount of insurance carried. The differ- 
ence would have to be paid by the farmer. 
The Illinois "wrongful death" statute 
provides for a maximum recovery of 
$30,000, but there is no limit for injuries. 

2. The second advantage is social de- 
sirability of added security for employees 
in a relatively high-accident-rate business. 
Often the employee is injured through 
his own negligence, and without work- 
men's compensation he generally cannot 
recover. The employer would be under 
no legal liability and could simply dis- 
charge the injured employee. 

A farmer often feels morally obligated 
to help his injured employee, but due to 
his own financial burden finds himself 
unable to do so. An extended insurance 
or a workman's compensation program 
would solve this problem. 

Disadvantages 

On the other side of the ledger are 
high cost and limited coverage. 

1. The cost of workmen's compensa- 
tion is borne by the employer. It cannot 
be deducted from the employee's wages. 
Any employer withholding any amount 
for the purpose of paying a workmen's 
compensation insurance premium can be 
subject to a fine of $10 to $1,000 or six 
months' imprisonment in the county jail, 
or both fine and imprisonment. 17 

To compare the cost of workmen's 

16 Ibid., s. 138.7. 

17 111. Rev. Stat. 1963. C. 48, s. 138.4. 



compensation coverage with employer's 
liability insurance, a hypothetical farm is 
used: 240 acres with 160 acres of grain, 
40 acres of hay, 40 acres of pasture, 20 
head of dairy cattle, 30 beef cattle, 10 
sheep, and 20 hogs. A farm family with 
two employees conduct the farming 
operation. 

Liability coverage is assumed to be 
$100,000 maximum so that costs may be 
more accurately compared. The costs of 
workmen's compensation and employer's 
liability insurance from five companies 

are: 

Workmen's 
compen- Employer's 
Company sation liability Difference 

A $273.44 $196.56 $76.88 

B 373.00 211.00 162.00 

C 283.44 193.90 89.54 

D 273.44 196.56 76.88 

E 283.44 80.20 203.24 

2. The second disadvantage is that 
workmen's compensation is limited to 
employees injured or killed in situations 
arising out of and in the course of their 
employment. Newer farm liability poli- 
cies (not workmen's compensation) gen- 
erally give broader protection to include 
injuries to business visitors and other 
persons coming on the premises, as well 
as protection to the farmer for injuries 
to his employees. 

It must be kept in mind, however, that 
aside from limited medical payments pay- 
able under liability policies, compensa- 
tion for injuries to employees depends 
on evidence that the employer was negli- 
gent in some way and thus caused the 
injury and that the employee was not 
negligent. 

Comment 

The statement has been made that 
farmers are availing themselves of the 
right to come under workmen's compen- 
sation in increasing numbers, 18 but con- 
versations with insurance representatives 

18 40 111. Bar Journal 700 (1952). 



EDUCATIONAL AND VOCATIONAL NEEDS OF RURAL YOUTH 



11 



do not indicate such a trend. A survey 
of 10 insurance agencies revealed that 
only one had ever written a workmen's 
compensation policy covering a farmer. 
The one farmer who was covered had a 
farm-related business operation in the 
city. 

Farm labor today is subject to a high 
accident incidence, and when an injury 
or death occurs, the hardship on a farm 



laborer is just as severe as on an indi 

trial worker. Although there are admin- 
istrative problems connected with work- 
men's compensation, and it is expensive, 
one could argue that some additional pro- 
tection for injuries is needed for farm 
employees. Farm labor is in short sup- 
ply, and this would, to some degree, place 
farm employers in a better competitive 
position to attract workers. 



Educational and Vocational Needs 
of Rural Youth: A Pilot Study 



D. E. LINDSTROM 1 

lODAY "9 out of every 10 farm-reared 
boys have no other choice but to find 
employment off the farm." 2 

"In comparison with men who are 
reared in urban areas, farm-reared men 
are disproportionately represented in 
lower prestige and less well-paying jobs. 
One reason for these consistent differ- 
ences has been the lower educational 
levels among farm men: 11 years on 
the average for the urban, 9 years for the 
rural nonfarm, and S.6 years for the 
farm male." 3 

"Over half of the rural farm males 
16 to 24 years of age in the civilian labor 
force in 1959 not enrolled in school failed 
to graduate from high school; 61 percent 
of the farm residents lacked a high school 
education."* 

These quotations point up three aspects 



1 Hazel M. Chambers, University of Illinois 
Department of Agricultural Economics (Rural 
Sociology), rendered valuable assistance in sta- 
tistical work and preparation of the manuscript. 

2 Edward W. Aiton, Myth and Myopia — 
Blocks to Progress. Ext. Serv. Rev., U.S. Dept. 
Agr. p. 140. Aug., 1963. 

3 Lee G. Burchinal, Farm vs. Nonfarm Youth 
in the Urban Labor Market. Op. cit., p. 144. 

4 James D. Cowhig, Early Occupational 
Status as Related to Education and Residence. 
Jour. Rural Soc. 27:18. Mar., 1962. 



of the dilemma facing rural youth in our 
country. 

A 3-part study is now being carried on 
to reveal the educational and vocational 
needs of rural youth in Illinois, including 

(1) a pilot study in Sullivan, Illinois, 

(2) an analysis of test and environmental 
data on hand in the Illinois High School 
Testing Program files on juniors and sen- 
iors in 24 rural schools in eight counties 5 
that had given the Illinois High School 
Testing Program tests, and (3) a study 
based on tests and environmental and 
occupational choice data in all 36 high 
schools in these eight counties (Carroll, 
Mercer, Marshall, Moultrie, Calhoun, 
Franklin, Alexander, and Pulaski). This 
article discusses the problems and sum- 
marizes our findings so far. 

The problems facing rural youth in 
these eight counties are almost as acute 
as those in the country as a whole. Of 
2,326 juniors and seniors in 24 high 
schools in 1962-63, almost 60 percent did 
not plan to go to college. More girls than 
boys did not plan to go to college: 66 

5 The eight counties are those in eight geo- 
graphical areas of the state with rural area 
development committees. These counties may 
be taken as representative of rural counties in 
the state as a whole. 



12 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



Table 1. — College Plans of 2,326 Seniors and Juniors in 24 Rural High Schools 

in 8 Counties in Illinois, 1962 



Males 



Females 



Farm 



Nonfarm 



Farm and 
nonfarm 



Farm 



Nonfarm 



Farm and 
nonfarm 



Number who plan to 

go to college 132 (42.6%) 427 (48.2%) 559 (46.7%) 

Number who do not 
plan to go to 
college 178 (57.4%) 459 (51.8%) 637 (53.3%) 



91 (30.6%) 290 (34.9%) 381 (33.7%) 



206 (69.4%) 540 (65.0%) 749 (66.3%) 



percent of 1,130 girls and 53 percent of 
1,196 boys (Table 1)= More farm than 
nonfarm youths had no plans for col- 
lege: 63 percent of the farm and 58 per- 
cent of the nonfarm. More of the farm 
girls than farm boys said they did not 
plan to go to college: 69 percent of the 
farm girls and 57 percent of the farm 
boys. Also, more of the nonfarm girls 
than nonfarm boys had no college plans: 
65 percent of the nonfarm girls and 52 
percent of the nonfarm boys. 

Problems Facing Those 
Without College Plans 

The fact that almost 60 percent of 
these rural young people in various cate- 
gories did not plan to go to college pre- 
sents educators, parents, and citizens 
with serious problems, especially since 
most of these youths must find jobs out- 
side the community in which they live. 
Problems of employment and further 
training therefore should be of grave 
concern to employers outside as well as 
inside the communities in which these 
young people have been getting their ed- 
ucation. These problems are all the more 
acute in view of the fact that in Illinois 
about one-fourth of the high school stu- 
dents drop out before they graduate. 6 
The seriousness of the problem is pointed 
up by a study now being made by the 
employment service in St. Louis, which 
showed that they normally process 2,000 

6 David M. Jackson and William M. Rogge, 
Identification of Potential High School Drop- 
outs. Office of State Supt. Public Instruction, 
Springfield, 111. 1963. 



in-migrants a week, most of whom are 
rural migrants and come without re- 
sources or skills. 7 

Traditionally in our school systems we 
have been concerned most about training 
high school students for college. Yet in 
the Sullivan group only a little over half 
(52 percent) planned to go to college. 
About 64 percent of the boys and only 
41 percent of the girls had such plans 
(Table 2). Of those not planning to go 
to college, one- fourth of both the boys 
and girls did not know what they were 
going to do, and almost two-fifths planned 
to attend trade or business school (38 
percent of the boys and 49 percent of the 
girls). About one-third of the boys 
planned to go into the army or skilled 
jobs, and only 3 percent planned to farm. 
A little over one-fourth of the girls 
planned to be homemakers or go into 
clerical, sales, or service occupations. 

Preparation for a Job 

Very few of those not planning to go 
to college felt prepared to take a job. 
Ninety percent of the boys and 81 per- 
cent of the girls reported that they 
needed more preparation and training. 
Here is evidence that plans must some- 
how be made to take care of these "for- 
gotten" boys and girls, as well as those 
who drop out of high school. They may 
need a special kind of training that is 
both vocational and cultural. 



7 Kathryn Close, Facts and Myths About 
Rural Youth, in "Children." U.S. Dept. Health, 
Educ, Welf., Children's Bureau, p. 233. Nov.- 
Dec, 1963. 



EDUCATIONAL AND VOCATIONAL NEEDS OF RURAL YOUTH 



13 



Table 2. — College Plans of 160 Seniors and 
Juniors in Sullivan, Illinois, High School, 1962 



Male 



Female 



Number who 
plan to go to 
college 51 (63.7%) 

Number who do 
not plan to go 
to college 29 (36.2%) 



33 (41.2%) 



47 (58.7%) 



Preferred Place to Live 

No matter what type of training they 
go after — college or other — most of 
these young people (about three out of 
four) want to live in the country or in a 
small town. In view of this desire, one 
may well ask what in the way of occu- 
pations such small places can offer these 
young people or whether their expecta- 
tions have any foundation. Although 
more than 75 percent prefer the country 
or small town, only 3 percent of the boys 
and none of the girls would choose farm- 
ing as their occupation. 

Preferences as to Self-Employment 

Boys and girls differed in whether they 
would prefer to work for themselves or 
for others: 63 percent of the boys choos- 
ing college and 76 percent of those not 
choosing college preferred self-employ- 
ment. But 73 percent of the girls choos- 
ing college and 57 percent of those not so 
planning preferred working for others. 
Although 79 percent of the boys planning 
to go to college wanted managerial or 
professional jobs, only 41 percent of 
those without college plans wanted such 
positions. 

Some Unanswered Questions 

If these findings are considered to be 
representative of young people in a good 
farming territory, one can only conclude 
that there is a great deal of uncertainty 
among students from rural areas coming 
out of high school, even in the best areas. 



One may well ask, since the majority 
do not plan to go to college, whether we 
need not be more concerned about those 
not planning to go to college. Should 
special plans be made for these youths, 
and for those who drop out, to receive 
training after they leave high school? 
The data in this study indicate that such 
plans should be made. The question is: 
What type of training should it be? 

The answer hinges on the capabilities 
and interests of the boys and girls in 
these groups. Do those who choose not 
to go to college differ in intelligence, 
competence, and personality from those 
who plan to go? Such information could 
help guide us in providing the kinds of 
training the majority of our rural young 
people, those not planning to go to col- 
lege, need in order to be prepared for 
their lifework. 

So far we have only indications of 
what these differences are, and much of 
what we have is limited to the data from 
the Sullivan sample. We hope the data 
obtained from students in schools in the 
other seven counties will give more com- 
plete answers. 

The research reported here was de- 
signed to test the hypotheses that ( 1 ) the 
majority of farm-reared boys and girls 
have aptitudes and potential skills best 
fitting them for technical and artisan 
occupations, including those related to 
agriculture, and (2) the personal and 
socio - psychological characteristics of 
these young people are such that they 
would find the best possible satisfaction 
in life from these pursuits. 

Differences in Achievement Scores 

A comparison of educational scores 
for students planning to go to college 
with those not planning to go to college 
is presented in Table 3. Except for me- 
chanical aptitude in boys, the students 
planning to go to college had significantly 



14 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



Table 3. — Mean Educational Achievement Scores 

for 160 Seniors and Juniors in Sullivan, 

Illinois, High School, 1962 a 



Variables 



Group A M Group A F 

compared compared 

with with 

Group B M Group B F 



Abstract reasoning. 
Verbal reasoning . . , 



Total scores on verbal 
and abstract reasoning 

Natural science reading . . 

Social science reading. . . . 

Writing achievement .... 

Writing correctional error 

Writing functional error. . 

Mechanical aptitude .... 



38.95 
33.29 

33.54 
24.62 

72.50 
57.92 

37.16. 
28.18 

35.81 
29.62 

50.29 
41.55 

13.95 
18.00 

4.68 
9.07 

47.15 

46.26 



XXX 



XXX 



XXX 



XXX 



XXX 



XXX 



XX 



XXX 



38.90 
32.18 

35.93 
25.25 

74.84 
57.44 

35.75 
27.51 

37.06 
30.04 

55.62 

45.51 

9.62 

16.39 

3.71 
6.97 

39.00 
30.38 



XX 



XXX 



XXX 



XXX 



XXX 



XXX 



XXX 



XXX 



XXX 



a The following applies to this and all subsequent 
tables: 

Group A M =51 boys who plan to go to college 
Group A F = 33 girls who plan to go to college 
Group B M = 29 boys who do not plan to go to college 
Group B F = 47 girls who do not plan to go to college 
Using "t" test of differences between mean scores: 
x significant at .05 level 

xx significant at .01 level 
xxx significant at .001 level 



higher scores than those not planning to 
attend college. There is no evidence that 
the mechanical aptitude of boys not 
planning to attend college is different 
from those who plan to attend. 

Differences in 
Personality Characteristics 

In a comparison of those planning to 
go to college and those not so planning in 
both male and female groups, the IPAT 
16 P.F. test was used (Table 4). 8 For 
the males, only three of the 16 factors 
showed significant differences. Those 
planning to attend college were more 
enthusiastic and talkative, more sensitive 
and effeminate, and more self-sufficient 

8 Raymond B. Cattell and Glen F. Stice, The 
Sixteen Personality Factor Questionnaire. In- 
stitute for Personality and Ability Testing, 
Champaign, 111. 1962. 



and resourceful than those not planning 
to attend. Although there were no sig- 
nificant differences between the two 
groups of boys on the dull, low-capacity 
to bright, intelligent continuum, there was 
a significant difference between girls who 
planned to go to college and those who 
did not; the former tended to be brighter 
and more intelligent. Girls planning to 
go to college also were more confident 
and unshakable than those not so plan- 
ning. In the glum, silent to enthusiastic, 
talkative continuum as well as the tough, 
realistic to sensitive, effeminate one, the 
significant differences between the two 
groups of girls paralleled the results of 
the boys' tests. 

Differences in Environmental Factors 

Considering environmental factors, 
statistically significant differences were 
evident between those who planned to go 
to college and those who did not. 

Parents of boys and girls who planned 
to go to college had significantly higher 
educational attainment than did the par- 
ents of those not planning to go to col- 
lege (Table 5). 

The socio-economic status 9 of the 
families of boys and girls who planned 
to go to college was higher than that of 
those who did not plan to go (Table 6). 

Differences in Aspirations of Youth 

There were significant differences be- 
tween boys and girls who planned to go 
to college and those who did not in what 
they expected from an occupation. Each 
of the eight items in Table 7 was as- 
signed a rank of from one to eight. Boys 
planning to go to college attached greater 
importance to "status and prestige" in an 
occupation than did boys who did not 
plan to go. The results also suggest that 

9 Using the socio-economic status scale de- 
vised by W. H. Sewell. See "A Short Form of 
the Farm Family Socio-Economic Status Scale," 
in Jour. Rural Soc. 8:161-173. 1943. 



EDUCATIONAL AND VOCATIONAL NEEDS OF RURAL YOUTH 



15 



Table 4. — Mean Scores of 1 6 Personality Characteristics of the Personality Factor Tosls" 
for 160 Seniors and Juniors in Sullivan, Illinois, High School, 1962 1 ' 



Low score 
description 


High score 
description 


Group A M 

compared 

with 
Group B M 


Group A 1 ' 
compared 

with 
Group B F 


Aloof, cold 


Warm, sociable 


4.78 
4.86 


6.00 

5.61 


Dull, low capacity 


Bright, intelligent 


6.90 
6.51 


5.46 


Glum, silent 


Enthusiastic, talkative 


6.11 xx 

4.82 X 


6.54 Y 
5.40 


Timid, shy 


Adventurous, thickskinned 


5.15 
4.34 


5.57 
4.87 


Tough, realistic 


Sensitive, effeminate 


5 A ^ 

4.34 


6.39 x 
5.12 


Conventional, practical 


Bohemian, unconcerned 


5.43 

5.75 


5.00 
5.55 


Confident, unshakable 


Insecure, anxious 


5.64 
6.10 


5.12„ 

6.06 


Dependent, imitative 


Self-sufficient, resourceful 


5.13„ 
6.31 


4.51 
5.02 


Phlegmatic, composed 


Tense, excitable 


6.15 
6.58 


5.48 
5.89 


Emotional, unstable 


Mature, calm 


4.88 
4.37 


5.03 
5.19 


Submissive, mild 


Dominant, aggressive 


5.52 
4.89 


5.15 
4.63 


Casual, undependable 


Conscientious, persistent 


4.98 
4.86 


5.12 
5.31 


Trustful, adaptable 


Suspecting, jealous 


6.11 
6.34 


5.75 
6.06 


Simple, awkward 


Sophisticated, polished 


4.64 

4.17 


4.45 

4.72 


Conservative, accepting 


Experimenting, critical 


5.35 
4.82 


5.00 
4.89 


Lax, unsure 


Controlled, exact 


5.47 
5.20 


4.96 
4.95 



a The range of what may 
scores of 5 and 6. 

b See footnote under Table 



be called average or "normal" scores lies between the mean 
3 defining groups and indicating levels of significance. 



boys who planned to go to college as- 
signed greater importance to "opportun- 
ity to be boss" than boys who did not 
plan to go. 

Parental Desires for Youth 

Fathers of 70 percent of those plan- 
ning to go to college aspired toward 
professional or semi-professional occupa- 
tions for their sons, whereas only about 
50 percent of the fathers of those not 
planning to go to college had such plans 
for their sons. More than two-thirds of 
the mothers in the former group, com- 



pared with less than one-third of those 
in the latter, wanted their sons to go into 
professional and semi-professional work. 
Percentages of the young people who 
had the help of parents or relatives and 
high school counselors in making their 
decisions were highest for those with col- 
lege plans. About 43 percent of the boys 
planning to go to college discussed 
careers (lifework) and 51 percent dis- 
cussed jobs (what to do after graduation) 
with parents or relatives, while the re- 
spective percentages were only 21 and 31 
percent for boys without college plans. 



16 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



Table 5. — Mean Educational Level of Fathers 

and Mothers of 160 Seniors and Juniors 

in Sullivan, Illinois, High School, 1 962 a 



Mean 

educational 

level 



Group A M 
compared 

with 
Group B M 



Group A F 
compared 

with 
Group B F 



Father 4.37 

3.03 

Mother 4.29 

3.34 



XXX 



X 



4.00 
2.19 

4.09 

2.75 



XXX 



XXX 



a See footnote under _ Table 3 denning groups and 
indicating levels of significance. 



Table 6. — Mean Socio-Economic Status for 160 

Seniors and Juniors, in Sullivan, Illinois, 

High School, 1962 a 



Group A M 
compared 

with 
Group B M 



Group A F 
compared 

with 
Group B F 



Mean socio-economic 
status 



6.45 
5.65 



XXX 



6.12 

5.51 



x 



a See footnote under Table 3 defining groups and 
indicating levels of significance. 



Table 7. — Mean Ratings 3 for 8 Aspirations in 

an Occupation for 160 Seniors and Juniors 

in Sullivan, Illinois, High School, 1962 b 



Aspiration 


Group A M 

compared 

with 


Group A F 

compared 

with 




Group B M 


Group B F 


Friendly co-workers. . . 


. 4.14 
4.37 


3.21 
3.68 


Status, prestige 


4.14„ 

5.44 


5.39 
5.17 


Good salary 


1.94 
2.13 


2.72 




2.74 


Opportunity to be boss . 


• lifc* 


6.81 
7.29 


Security 


3.40 
3.65 


3.15 
3.08 


Fair and considerate 






boss 


. 4.84 


4.75 




3.75 


4.42 


Challenging and 






interesting work . . . . 


. 2.76 


2.33 




2.72 


2.89 


Chance to express own 
ideas 


. 4.74 


4.87 




4.96 


5.00 



a A lower mean score signifies a higher rating of the 
item. 

b See footnote under Table 3 defining groups and 
indicating levels of significance. 



Among the girls, 39 percent of those 
planning to go to college and only 25 
percent of those not so planning had such 
discussions. Relatively few of the boys 
went to their high school counselors: 
only 20 percent of those planning to go 
to college and 17 percent of those not so 
planning. The respective percentages for 
girls who had visited their counselors 
were higher: 33 and 36 percent. It is 
evident that most of these youths had 
little counseling. 

Lack of finances and lack of skill or 
education seemed to keep almost two- 
thirds of the boys and from one-third to 
two-fifths of the girls from choosing 
what they wanted to do, which for most, 
as we have seen, was to get additional 
training. 

There was a difference between boys 
choosing to go to college and those not 
so choosing in what aptitudes or interests 
most influenced their decision: 64 per- 
cent of the boys choosing college liked 
working with people and ideas, whereas 
65 percent of those not so choosing liked 
working with machinery, thus indicating 
a greater likelihood of success in tech- 
nical or artisan occupations. As for the 
girls, 79 percent of those planning to go 
to college and 72 percent of those not so 
planning liked working with people. 

Some Implications 

What do the facts of this study mean? 
One implication is the need for guidance 
programs to aid young people in making 
life choices that not only will make them 
the most efficient and productive mem- 
bers of the society of which they become 
a part, but will give them a satisfactory 
lifework and a sense of doing something 
of importance and value. 

Effective guidance, however, is not 
enough. We know from data released by 
the U.S. Department of Labor that un- 
employment is a chief source of anxiety, 



EDUCATIONAL AND VOCATIONAL NEEDS OF RURAL YOUTH 



17 



with almost 6 percent of our labor force 
unemployed in 1963. This rate was 
higher than in West Germany, Japan, 
Sweden, France, Great Britain, and Italy. 
Most of the unemployed are unskilled 
and poorly trained. From their ranks 
come most of those on relief, which in 
four Illinois counties are over 17 per- 
cent of the total population. Numbers of 
workers in occupations that require the 
most education and training have grown 
most rapidly: professional and technical 
workers; clerical, sales, and service work- 
ers; skilled workers; proprietors and 
managers; and operators, in that order. 
Farmers and farm workers have de- 
creased most rapidly. 10 All agencies in 
the community need to be aware of these 
changes in order to be as well prepared 
as possible to guide youth into useful and 
expanding fields of occupation. 

The provision of training opportuni- 
ties for rural boys and girls who leave 
high school, by graduation or otherwise, 
is a matter of grave concern to all citi- 
zens. In talking with school superin- 
tendents and principals in the eight 
counties regarding our study, one is im- 
pressed with the feeling of frustration 
held by these people. There was no 
place to which they could advise these 
youths to go for training. Several felt 
that, in addition to the need for new and 
different institutions for those leaving 
high school and not planning to go to 
college, many boys and girls now in 
school would do much better if they 
could get training more suited to their 
capabilities, interests, and aspirations. 

There is widespread discussion about 



10 ill 



'People, Skills and Jobs," Manpower Com- 
mission, U.S. Dept. Labor. 1963. 



what such institutions should be like and 
how they should be supported. Since SO 
many youths must leave the rural com- 
munity to find useful occupations, it is 
apparent that their training facilities 
should be supported primarily from 
state and federal sources. A boy trained 
in electronics, for example, may find his 
lifework in a factory or plant in a state 
many miles from his home community. 

It should be remembered also that the 
problem is not one of vocational training 
alone. There must also be cultural train- 
ing — for living, for life in a different 
environment, and for citizenship and 
world affairs. This kind of training is 
best given when young people begin to 
face adult responsibilities, when they 
seriously consider what they will choose 
as a lifew r ork. It should be made avail- 
able in centers designed for helping these 
young adults, where anyone can receive 
the type of training suited to his capabili- 
ties and interests. This is a big order, but 
we must face up to the need if we are 
to reduce the number of misfits coming 
out of our rural society, and the misery- 
attendant upon such lives. 

A basic change, finally, must come in 
attitudes toward jobs. People must be 
educated to regard any job, if it con- 
tributes to the wealth and well-being of 
our society, as an important job. Being 
a good electrician, plumber, house 
builder, or any other artisan or skilled 
person should carry with it pride in good 
work and appreciation from our inter- 
dependent and complex society for that 
good w r ork. Here, also, is a tremendous 
task facing our schools, churches, and 
communities. 



18 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



Soil Loss Tolerance and the Economics 
of Soil Conservation on Swygert Soils 



C. E. HARSHBARGER 

THE CENTRAL PROBLEM in the 
economics of soil conservation is to bal- 
ance present and future needs for the 
soil resource. The question is not whether 
to conserve, but the level of conservation. 
Further, the possibility exists that the 
views of individual farmers concerning 
the correct balance between present and 
future needs are different from the view 
held collectively by our society. The lat- 
ter finds expression in a number of ways. 

In this study, the soil loss tolerance — 
"the maximum soil loss that can be toler- 
ated and still achieve a degree of conser- 
vation needed to sustain economic pro- 
duction in the foreseeable future with 
present technology" 1 — is taken as the 
view of society regarding the appropri- 
ate level of soil conservation. The pres- 
ent value of discounted net returns of 
cropping plans over periods up to 50 
years is used to express the viewpoint of 
an individual farmer. 

In making land-use decisions, farmers 
seldom look beyond one generation, and 
frequently the planning horizon is even 
more limited by reason of tenure, age, or 
other considerations. The farmer must 
decide whether the delayed returns of the 
future are more valuable than returns 
that can be obtained more rapidly. 

The concept of discounting future re- 
turns is important in making decisions 
of this nature. The discount rate estab- 
lishes a time preference for the returns 
accruing from an investment over its use- 
ful life. A high discount rate normally 

1 William H. Bender, "Soil Erodibility and 
Soil Loss Tolerance," in Soil Loss Prediction 
for the North Central States (proceedings of 
a workshop attended by representatives of the 
SCS, ARS, state experiment stations, and 
extension services, Chicago), p. 21. 1962. 



and E. R. SWANSON 

favors plans that give higher returns in 
the early years of the planning period, 
whereas a low discount rate favors plans 
giving higher returns in later years. A 
zero rate would mean, for example, that 
$100 at any time in the future would be 
worth exactly $100 today. This article 
shows how discounting and the length of 
the planning horizon affect the individual 
farmer's economic choice of a cropping 
system on a soil type in northeastern Illi- 
nois. 2 These choices are then compared 
with the cropping systems consistent with 
soil loss tolerances. The amount of in- 
come sacrificed by farmers meeting soil 
loss tolerances is also presented. 

Northeastern Illinois has approxi- 
mately 2^/2 million acres of slowly per- 
meable or "tight" soils. 3 The slow rate 
at which water moves through these soils 
can create serious farming problems. 
Moderate slopes are very susceptible to 
erosion due to this impermeability. The 
soils also tend to be drouthy because root 
penetration is impeded. 

Swygert silt loam to silty clay loam 
(soil type 91), located principally in 
northeastern Illinois, is representative of 
a soil that is subject to severe erosion. 
It is a dark soil formed from thin silty 
loessial (windblown) material on com- 
pact, plastic calcareous (limey) glacial 
till. 4 Slopes usually range from 1 to 6 

2 C. E. Harshbarger, Selection of Crops and 
Soil Conservation Practices on Swygert Soils : 
A Study of the Influence of the Planning 
Horizon and the Discount Rate. Unpublished 
Master's thesis, University of Illinois. 1963. 

3 E. L. Sauer, J. L. McGurk, and L. J. 
Norton, Costs and Benefits from Soil Conser- 
vation in Northeastern Illinois. 111. Agr. Exp. 
Sta. Bui. 540. p. 563. 1950. 

4 H. L. Wascher, R. S. Smith, and R. T. 
Odell, Livingston County Soils. 111. Agr. Exp. 
Sta. Soil Rpt. 72. p. 27. 1949. 



SOIL LOSS TOLERANCE AND ECONOMICS OF SOIL CONSERVATION 



19 



percent, and severe erosion occurs on 
those greater than 3 percent. 

Mechanical conservation practices 
have varying degrees of effectiveness for 
controlling runoff. Well-planned and 
well-maintained grass waterways are in- 
dispensable. Contour farming is also 
effective in retarding soil losses. Terrac- 
ing is questionable on Swygert soils un- 
less the ridges are inspected following 
dry periods. 

Method of Study 

The budgeting method was employed 
in order to control a number of variables 
affecting yields, in particular, fertilizer. 
These variables were apt to give consid- 
erable difficulty in a statistical analysis of 
commercial farms in the area. Estimates 
of soil loss in tons per acre for eight 
rotations were made for two slopes (4 
and 6 percent) of Swygert soils. The 
effect of contouring on soil losses was 
also estimated. Yield declines, if any, 
were calculated from these estimates of 
soil losses. To isolate the effects of soil 
loss on yield, and to prevent the substi- 
tution of fertilizer from obscuring the 
yield decline due to soil loss, fertilizer 
was assumed to be applied only in the 
amounts taken out by crop removals. The 
present values of the net returns from 
the various cropping systems were then 
calculated, using two different discount 
rates and planning periods up to 50 years. 

Determining Amount of Soil Loss 

In order to obtain yield estimates for 
each system for each year during the 50- 
year period, it was necessary to relate 
yields to annual soil loss estimates. Thus, 
the relation of a number of factors to 
soil loss were considered first. Consider- 
able effort has been devoted to improving 
methods for predicting soil loss in farm 
conservation planning. A soil loss predic- 
tion equation has been designed to pro- 
vide major improvements in localized 



soil loss prediction. The equation, upon 
which the soil loss estimates for the ro- 
tations are based, is as follows: 5 

A = RKLSCP 

A is the average annual soil loss in 
tons per acre predicted by the equation. 
R is the rainfall-erosion index. K is the 
soil erodibility factor measured in tons 
per acre per unit of rainfall-erosion in- 
dex for a slope of specified dimensions 
(9 percent, 73 feet long). C is the crop- 
ping management factor which combines 
the effects of crops, crop sequence, 
and the various management practices. 
L is the length of slope factor, S is the 
steepness of slope factor, and P is the 
erosion control practice factor. For this 
study, R = 170, K = .43, L = 200 feet, 
S = 4 percent and 6 percent, and C and 
P varied according to the rotation and 
conservation practice used. 

The estimated annual soil losses based 
on this equation for eight rotations are 
presented in Table 1. These would, of 
course, vary from year to year. It should 
be kept in mind that we are dealing with 
a pure soil type and specific slopes. In 
reality, slopes will be variable and drain- 
age patterns will create the possibility for 
gully erosion, and waterways and ditches 
will fill up with soil from adjacent areas. 
We deal here only with the problem of a 
single soil type at two slopes which ap- 
proximate the range of slopes found on 
Swygert soils. As might be expected, soil 
losses are greater on the steeper slopes. 
The field losses for up-and-down cultiva- 
tion on 4-percent slope range from 2.5 to 
18.8 tons per acre. On slopes of 6 per- 
cent, the range of annual soil losses is 
from 5.4 to 29.2 tons per acre. Contour- 
ing generally reduces estimated annual 
losses by one-half for both slope groups. 

6 D. D. Smith, "History of Soil Loss Predic- 
tion and the New Equation," in Soil Loss Pre- 
diction for the North Central States (proceed- 
ings as described in footnote on page 18). p. 7. 



20 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



Table 1 . — Annual Soil Loss Estimates for Swygert 

Soils, by Rotation, Slope Group, 

and Method of Cultivation 



Rotation 


Up-and-down 
cultivation 

4% 6% 
slope slope 


Contouring 


4% 
slope 


6% 
slope 


Continuous corn . 

C-C-0 (cl) 

C-C-SB-0 (cl)... 
C-SB-0 (cl) 
C-C-SB-O-M 

C-C-O-M 

C-O-M 


. 18.8 
11.8 

. 13.6 
11.8 

7.4 
5.3 
2.5 
4.4 


tons per 

29.2 
18.4 
21.1 
18.4 
13.6 

9.5 

5.4 

8.2 


acre 

9.4 
5.9 
6.8 
5.9 
3.7 
2.6 
1.3 
2.2 


14.6 
9.2 

10.5 
9.2 

6.8 
4.8 

2.7 


C-C-O-M-M 


4.1 



Estimates on the inches of annual soil 
loss per rotation acre are necessary for 
determining estimates of the annual yield 
reductions that result by exceeding soil 
loss tolerance. 6 These estimates may be 
obtained by dividing the estimated soil 
loss by the weight of an acre-inch 7 of 
Swygert. 

For the study, it was assumed that 
moderate erosion had occurred prior to 
the beginning of the analysis and that 
10 inches of the A horizon remain. The 
top 3 inches were assumed to be the A x 
horizon, and the remaining 7 inches (re- 
ferred to as the A-B horizon) were as- 
sumed to be the A horizon which, with 
increasing erosion, became mixed with 
progressively more B horizon. The re- 
spective weights of an acre-inch for these 
two horizons of Swygert are 130.5 tons 
for Ax and 145.5 tons for A-B. These 
weights divided into the estimates of 
annual soil loss in tons give an estimate 
of the annual soil loss in inches. 

Initial Yields and Annual Reductions 

As annual soil losses increase, it is 
expected that yields will decrease. Data 
published by the Soil Conservation Serv- 

6 The annual soil loss tolerance for Swygert 
soils recommended by the SCS is 3 tons per 
acre. 

7 Volume of a solid with surface of 1 acre 
and depth of 1 inch. 



ice provide a method for estimating 
these decreases in yields by relating them 
to annual soil loss. 8 Base yields of each 
major crop are selected for several soil 
types. These base yields assume a high 
level of management and an A and 
(zero) slope and erosion class, respec- 
tively. To obtain a yield estimate for a 
particular soil type, the base yield for a 
given crop is adjusted for slope and 
erosion. 

Figure 1 shows the influence of slope 
upon base yields. The percentage that 
these yields are reduced is directly pro- 
portional to the degree of slope. For 
Swygert soils with 4- and 6-percent 
slopes, base yields are reduced 3.2 and 
5.4 percent, respectively. The percentage 
adjustment for erosion (Fig. 2) is in- 
versely related to the depth of the A 
horizon. After the depth has been re- 
duced to 7 inches, the adjustment factor 
increases. Figure 2 shows that the per- 
centage reduction in base yields per inch 
of soil loss is 3.9 percent for the A x hori- 
zon and 4.7 percent per inch of soil loss 
for the A-B horizon. 

To help clarify this discussion, an 
example is given. The base yields as- 
sumed for Swygert soils are 84 bushels, 
33 bushels, 61 bushels, and 4.2 tons 9 per 
acre for corn, soybeans, oats and 
meadow, respectively. Assuming a 6-per- 
cent slope, the corn yield adjustment for 
slope is derived by multiplying the base 
yield by the appropriate slope reduction 
factor (5.4 percent). 

84 bu. X .054 = 4.5 bu. 
Next, the yield adjustment for erosion 



8 L. J. Bartelli, Technical, Management, and 
Information Note, Soils No. 10, Soil Conser- 
vation Service, Champaign, 111., June, 1960. 

R. T. Odell, Measurement of the Produc- 
tivity of Soils Under Various Environmental 
Conditions, Agron. Jour. 42:282-292. 1950. 

9 Bartelli, op. cit., does not list a base yield 
for meadow. It was assumed to be 4.2 tons per 
acre from which slope and erosion adjustments 
were computed. 



SOIL LOSS TOLERANCE AND ECONOMICS OF SOIL CONSERVATION 



21 



I- 

QJ 
O 
Ct 

UJ 



O 

\- 
O 

a 

UJ 



UJ 

>• 



2 - 



10 - 



8 - 



6 - 



4 - 



2 - 



PERCENT SLOPE 
SLOPE GLASS 




Fig. 1. — Percent yield reduc- 
tion per unit of slope in- 
crease. 



60 - 



50 - 



8 

tr 

UJ 
CL 



40 - 



Fig. 2. — Percent yield reduction 
per inch of soil loss in A horizon. 



f= 30 - 



o 

Q 
UJ 

q: 



Q 

-J 

y 



20 - 



10 



IN. OF A HORIZON 
EROSION CLASS 




22 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



is obtained by multiplying the base yield 
by the appropriate reduction factor. 

Ai horizon: 84 bu. X .039 = 

3.3 bu. per inch of soil loss 

A-B horizon: 84 bu. X .047 = 

3.9 bu. per inch of soil loss 

The adjustment factors for slope and 
erosion for the other crops are obtained 
by using the same procedure. They are: 

Slope Erosion 

4 6 
pet. pet. A x A-B 

Corn (bu. per acre) 2.7 4.5 3.3 3.9 

Soybeans (bu. per acre) 1.1 1.8 1.3 1.5 

Oats (bu. per acre) 2.0 3.7 2.4 2.8 

Meadow (tons per acre) .14 .23 .17 .20 

When the erosion factors are multi- 
plied by the inches of annual soil loss, the 
product represents an estimate of the 
annual yield reduction for that crop. 

Bartelli's base yields are used to de- 
termine the absolute yield adjustments 
for slope and erosion for each crop in 
the Ai and A-B horizons. However, yield 
estimates obtained from the Illinois Farm 
Bureau-Farm Management records are 
used as the initial starting point because 
they tend to reflect the present conditions 
more accurately. 10 These estimates, along 
with the annual yield reduction factors 
for each horizon and the number of years 
necessary to go from the A ± to the A-B 
horizon, are summarized in Tables 2 
through 5 according to the cultivation and 
slope categories set out in Table 1. 

The expected yield of any crop may 
be predicted for any given year by using 
these tables. For example: What will 
the yield be 21 years from now for con- 
tinuous corn? (See Table 2.) The ini- 
tial yield is 67 bushels per acre. The 
slope adjustment factor reduces the ini- 
tial yield 2.7 bushels. Furthermore, the 

10 F. J. Reiss, Economics for Agriculture. 
TA-13, Dept. Agr. Econ. Univ. of 111. 1962. 

G. A. Peterson and E. R. Swanson, Highest 
Return Farming Systems for Tama and Mus- 
catine Soils. 111. Agr. Exp. Sta. Bui. 602. pp. 
6-7. 1956. 



expected yield will be reduced 0.47 bush- 
els annually for 20 years — the time it 
takes to remove the remaining 3 inches 
of the A x horizon. Upon entering the 
A-B horizon, annual yield reductions will 
be .50 bushels and will remain at this 
level in the A-B horizon. Therefore, the 
expected yield of corn 21 years hence is: 

Initial yield 67.0 bu. 

Less slope factor 2.7 

Less erosion factor (Ai) 

(20 X .47) 9.4 

Less erosion factor (A-B) 

(1 X .50) 5 

Total deductions 12.6 

Expected yield 54.4 bu. 

This analysis does not include the ef- 
fects of soil deposited in lower areas. In 
some instances this may require cleaning 
of ditches, waterways, and terrace chan- 
nels. It might also increase yields on the 
lower areas in some situations. 

Calculation of Accumulated Net Returns 

Information pertaining to prices and 
production costs was obtained from data 
published by the University of Illinois 
and the Illinois Crop Reporting Service. 11 
Prices used were: corn, $1.00 per 
bushel; soybeans, $2.25 per bushel; oats, 
$0.62 per bushel; and hay, $19.25 per ton. 

The expected yields are multiplied by 
the product prices to obtain total revenue 
per acre for each year. Direct costs and 
fertilizer costs, based upon the amount of 
nutrients removed by the crops, are de- 
ducted to obtain net revenue. With this 
assumption about fertilizer, the total re- 
turns will decrease annually due to the 
yield reductions from soil erosion. 

Table 6 summarizes the net return 
estimates of eight rotations for the first 
year along with annual net return reduc- 

11 R. A. Hinton, Farm Management Manual. 
AE-3792, Dept. Agr. Econ. Univ. of 111. pp. 
3-4. 1962, 

111. Agr. Stat. Annual Summary. 111. Crop 
Rptg. Serv. Bui. 63-1. p. 68. 1963. Ibid. Bui. 
62-2. p. 87. 1962. 



SOIL LOSS TOLERANCE AND ECONOMICS OF SOIL CONSERVATION 



23 



Table 2. — Initial Yield Estimates of Crops and Annual Yield Reduction Factors for A) 
and A-B Horizons, by Rotation, Swygert, Up-and-Down Cultivation, 4% Slope 











Rotation* 










1 


2 


3 


4 5 


6 


7 


8 


Years b 


20 


33 


28 


33 52 


73 


156 


88 



Cora bu - 

Initial yield 67 

Slope adjustment 2 . 73 

Erosion factor (Ai) 47 

Erosion factor (A-B) 50 

Soybeans 

Initial yield 

Slope adjustment 

Erosion factor (Ai) 

Erosion factor (A-B) 

Oats 

Initial yield 

Slope adjustment 

Erosion factor (Ai) 

Erosion factor (A-B) 

Meadow ion 

Initial yield 

Slope adjustment 

Erosion factor (Ai) 

Erosion factor (A-B) 



bu. 


bu. 


bu. 


bu. 


bu. 


bu. 


bu. 


71 


71 


72 


75 


77 


80 


79 


2.73 


2.73 


2.73 


2.73 


2.73 


2.73 


2.73 


.30 


.34 


.30 


.19 


.13 


.06 


.11 


.32 


.37 


.32 


.20 


.14 


.07 


.12 




29 


29 


29 










1.07 


1.07 


1.07 


.... 




. • • ■ 




.13 


.12 


.07 


• • • • 


> . . • 


.... 




.14 


.12 


.08 


.... 


.... 


.... 


39 


39 


39 


39 


42 


44 


42 


1.98 


1.98 


1.98 


1.98 


1.98 


1.98 


1.98 


.22 


.25 


.22 


.14 


.10 


.05 


.08 


.23 


.27 


.23 


.14 


.10 


.05 


.09 


ton 


toil 


ton 


ton 


ton 


ton 


ton 



2.9 
.136 
.009 
.010 



2.9 
.136 
.007 
.007 



2.9 
.136 

.003 
.003 



3.3 
.136 
.006 
.006 



* 1 — Continuous corn; 2 — C-C-O(cl); 3 — C-C-SB-O(cl) ; 4 — C-SB-O(cl); 5 
C-C-O-M; 7 — C-O-M; 8 — C-C-O-M-M. 
b Number of years necessary to remove the remaining 3 inches of Ai horizon. 



C-C-SB-O-M; 



Table 3. — Initial Yield Estimates of Crops and Annual Yield Reduction Factors for Ai 
and A-B Horizons, by Rotation, Swygert, Up-and-Down Cultivation, 6% Slope 











Rotation* 










1 


2 


3 


4 5 


6 


7 


8 


Years b 


13 


21 


18 


21 28 


41 


72 


47 



Cora bu. 

Initial yield 67 

Slope adjustment 4.49 

Erosion factor (Ai) 74 

Erosion factor (A-B) 79 

Soybeans 

Initial yield 

Slope adjustment 

Erosion factor (Ai) 

Erosion factor (A-B) 

Oats 

Initial yield 

Slope adjustment 

Erosion factor (Ai) 

Erosion factor (A-B) 

Meadow ton 

Initial yield 

Slope adjustment 

Erosion factor (Ai) 

Erosion factor (A-B) 



bu. 


bu. 


bu. 


bu. 


bu. 


bu. 


bu. 


71 


71 


72 


75 


77 


80 


79 


4.49 


4.49 


4.49 


4.49 


4.49 


4.49 


4.49 


.46 


.53 


.46 


.24 


.24 


.14 


.21 


.49 


.57 


.49 


.37 


.26 


.14 


.22 




29 


29 


29 








• • 


1.76 


1.76 


1.76 






.... 


• • • 


.21 


.18 


.13 




• • • • 


.... 




.22 


.19 


.14 


.... 


.... 


.... 


39 


39 


39 


39 


42 


44 


42 


3.26 


3.26 


3.26 


3.26 


3.26 


3.26 


3.26 


.34 


.39 


.34 


.25 


.17 


.10 


.15 


.36 


.41 


.36 


.27 


.19 


.11 


.16 


ton 


ton 


ton 


ton 


ton 


ton 


ton 








2.9 


2.9 


2.9 


3.3 


• • 






.225 


.225 


.225 


.225 








.017 


.012 


.007 


.010 






... 


.018 


.013 


.007 


.011 



a 1 — Continuous corn; 2 — C-C-O(cl); 3 — C-C-SB-O(cl); 4 — C-SB-O(cl); 5 — C-C-SB-O-M; 
C-C-O-M; 7 — C-O-M; 8 — C-C-O-M-M. 
b Number of years necessary to remove the remaining 3 inches of Ai horizon. 



24 ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



Table 4. — Initial Yield Estimates of Crops and Annual Yield Reduction Factors for Ai 
and A-B Horizons, by Rotation, Swygert, Contouring, 4% Slope 











Rotation a 










1 


2 


3 


4 5 


6 


7 


8 


Years b 


41 


66 


57 


66 105 


150 


301 


177 



Corn bu. 

Initial yield 67 

Slope adjustment 2 . 73 

Erosion factor (Ai) 24 

Erosion factor (A-B) 25 

Soybeans 

Initial yield 

Slope adjustment 

Erosion factor (Ai) 

Erosion factor (A-B) 

Oats 

Initial yield 

Slope adjustment 

Erosion factor (Ai) 

Erosion factor (A-B) 

Meadow ion 

Initial yield 

Slope adjustment 

Erosion factor (Ai) 

Erosion factor (A-B) 



bu. 


bu. 


bu. 


bu. 


bu. 


bu. 


bu. 


71 


71 


72 


75 


77 


80 


79 


2.73 


2.73 


2.73 


2.73 


2.73 


2.73 


2.73 


.15 


.17 


.15 


.09 


.07 


.03 


.06 


.16 


.18 


.16 


.10 


.07 


.03 


.06 




29 


29 


29 








• • ■ 


1.07 


1.07 


1.07 








. . . 


.07 
.07 


.06 
.06 


.04 
.04 


.... 


.... 


.... 


39 


39 


39 


39 


42 


44 


42 


1.98 


1.98 


1.98 


1.98 


1.98 


1.98 


1.98 


.11 


.12 


.11 


.07 


.05 


.02 


.04 


.11 


.13 


.1149 


.07 


.05 


.03 


.04 


ton 


ton 


ton 


ton 


ton 


ton 


ton 


. 






2.9 


2.9 


2.9 


3.3 


... 






.136 


.136 


.136 


.136 








.005 


.003 


.002 


.003 








.005 


.004 


.002 


.003 



a 1 — Continuous corn; 2 — C-C-O(cl); 3 — C-C-SB-O(cl); 4 — C-SB-O(cl); 5 — C-C-SB-O-M; 
6 — C-C-O-M; 7 — C-O-M; 8 — C-C-O-M-M. 

b Number of years necessary to remove the remaining 3 inches of Ai horizon. 



Table 5. — Initial Yield Estimates of Crops and Annual Yield Reduction Factors for Ai 
and A-B Horizons, by Rotation, Swygert, Contouring, 6% Slope 











Rotation* 










1 


2 


3 


4 5 


6 


7 


8 


Years b 


26 


42 


37 


42 57 


81 


144 


95 



Corn bu. bu. bu. bu. bu. bu. bu. bu. 

Initial yield 67 71 71 72 75 77 80 79 

Slope adjustment 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49 

Erosion factor (Ai) 37 .23 .27 .23 .17 .12 .07 .10 

Erosion factor (A-B) 39 .25 .28 .25 .18 .13 .07 .11 

Soybeans 

Initial yield 29 29 29 

Slope adjustment ... 1.76 1.76 1.76 .... .... .... 

Erosion factor (Ai) ... .10 .09 .07 

Erosion factor (A-B) .11 .10 .07 

Oats 

Initial yield 39 39 39 39 42 44 42 

Slope adjustment 3.26 3.26 3.26 3.26 3.26 3.26 3.26 

Erosion factor (Ai) .17 .19 .17 .12 .09 .05 .08 

Erosion factor (A-B) .18 .20 .18 .13 .09 .05 .08 

Meadow t° n t° n ion t° n ion ion t° n ion 

Initial yield 2.9 2.9 2.9 3.3 

Slope adjustment ... ... ... .225 .225 .225 .225 

Erosion factor (Ai) .009 .006 .003 .005 

Erosion factor (A-B) .009 .006 .004 .006 

a 1 — Continuous corn; 2 — C-C-O(cl); 3 — C-C-SB-O(cl); 4 — C-SB-O(cl); 5 — C-C-SB-O-M; 
6 — C-C-O-M; 7 — C-O-M; 8 — C-C-O-M-M. 

b Number of years necessary to remove the remaining 3 inches of Ai horizon. 



SOIL LOSS TOLERANCE AND ECONOMICS OF SOIL CONSERVATION 



25 



Table 6. — Estimates of Net Returns per Rotation Acre for the First Year 

of the Planning Horizon and Annual Net Return Reduction Factors for the 

Ai and A-B Horizons, by Rotation, Slope, and Method of Cultivation 



Up-and-down 

„ . cultivation 
Rotation 

4% 6% 

slope slope 

Continuous corn 

Net returns... $24.57 $19.45 

Annual reduction 

Ai horizon .40 .63 

A-B horizon .42 .66 

C-C-O(cl) 

Net returns. . . $18.72 $15.55 

Annual reduction 

Ai horizon .20 .32 

A-B horizon .22 .34 

C-C-SB-O(cl) 

Net ret urns... _ $22.18 $17.27 

Annual reduction 

Ai horizon .25 .39 

A-B horizon .26 .40 

C-SB-O(cl) 

Net returns... # $20.30 $14.86 

Annual reduction 

Ai horizon .19 .32 

A-B horizon .22 .34 

C-C-SB-O-M 

Net returns $20.88 $15.66 

Annual reduction 

Ai horizon .15 .26 

A-B horizon .16 .27 

C-C-O-M 

Net returns $19.16 $15.24 

Annual reduction 

Ai horizon .09 .18 

A-B horizon .11 .19 

C-O-M 

Net returns..^ $15.46 $11.35 

Annual reduction 

Ai reduction .04 .09 

A-B horizon .04 .10 

C-C-O-M-M 

Net returns $20.28 $16.13 

Annual reduction 

Ai horizon .07 .15 

A-B horizon .08 .16 



Contouring 


4% 


6% 


slope 


slope 


$24.76 


$19.76 


.20 


.31 


.21 


.33 


$18.82 


$15.72 


.10 


.15 


.11 


.18 


$22.32 


$17.47 


.12 


.19 


.13 


.20 


$20.65 


$15.01 


.10 


.16 


.11 


.17 


$20.96 


$15.80 


.08 


.13 


.08 


.14 


$19.22 


$15.34 


.05 


.08 


.06 


.09 


$15.49 


$11.37 


.02 


.04 


.03 


.04 


$20.32 


$16.20 


.03 


.07 


.04 


.07 



tion factors for both horizons. The dif- 
ferences between the two horizons for a 
given rotation are, for the most part, 
negligible. The largest difference is 3 
cents. 

Comparison of Cropping Systems 

The present values of accumulated fu- 
ture returns from two selected rotations 
for planning horizons up to 50 years are 



presented in Figures 3 and 4. The role 
of the length of the planning horizon and 
the size of the discount rate can be seen 
by a study of these figures. 

With up-and-down cultivation, on the 
4-percent slope group, continuous corn is 
a more profitable cropping system with 
a 5-percent discount rate for all planning 
horizons up to about 37 years (Fig. 3A), 
after which the C-C-O-M-M rotation be- 



26 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



Fig. 3. — Present value of accumulated net income, Swygert soils, 4% slope. 
A — 5% Discount 



1400 



350 



300 



250 



200 



150 



100 



50 



CONTINUOUS CORN — UP-AND-DOWN 
CONTINUOUS CORN— CONTOUR 



C-C-0-M-M— UP-AND-DOWN 

C-C-0-M-M— CONTOUR 




20 30 

NUMBER OF YEARS 



50 



B 20% Discount (key to graph lines same as above) 




10 



20 30 

NUMBER OF YEARS 



40 



50 



SOIL LOSS TOLERANCE AND ECONOMICS OF SOIL CONSERVATION 



27 



comes more profitable. When a low in- 
terest rate is used for discounting, plans 
giving higher returns in the latter years 
of the planning horizon will be favored. 
Normally, a less intensive rotation will 
be selected by using this criterion. 



A higher discount rate extends the 
period over which the more intensive ro 
tation remains optimal. For a 20-percent 
discount rate on the 4-percent slope with 
up-and-down cultivation, continuous corn 
has the highest present value at the end 



Fig. 4. — Present value of accumulated net income, Swygert soils, 6% slope. 
A — 5 % Discount 



$300 



250 



200 



150 — 



100 



50 — 



CONTINUOUS CORN— UP-AND-DOWN 
CONTINUOUS CORN— CONTOUR 



C-C-0-M-M— UP-AND-DOWN 

C-C-0-M-M — CONTOUR 




20 30 

NUMBER OF YEARS 



50 



B - — 20% Discount (key to graph lines same as above) 




10 



20 30 

NUMBER OF YEARS 



40 



50 



28 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



of the 50-year period (Fig. 3B). At this 
discount rate, incomes beyond about 25 
years have very small present values. 

Steeper slopes tend to shorten the 
period over which an intensive rotation 
remains optimal, because the soil losses 
are relatively greater. On the 6-percent 
slopes with up-and-down cultivation, con- 
tinuous corn is optimal for all planning 
horizons under 17 years when a 5-percent 
discount rate is used (Fig. 4A). At about 
17 years, the C-C-O-M-M rotation be- 
comes more profitable than continuous 
corn. Not shown in the figure is the 
C-C-SB-O-M rotation, which surpasses 
continuous corn in accumulated returns 
after about 27 years. 

As on the 4-percent slope, using a 
discount rate of 20 percent extends the 
period over which continuous corn re- 
mains optimal (Fig. 4B). Continuous 
corn with up-and-down cultivation re- 
mains optimal for all planning horizons 
under 50 years as opposed to 17 years 
when a 5 percent interest rate is used. 

With contouring, continuous corn re- 
mains optimal on 4-percent slopes for the 
entire 50-year period at both discount 
rates. (See Figs. 3 and 4.) On 6-percent 
slopes, C-C-O-M-M has the greater ac- 
cumulated returns after 46 years with a 
5-percent discount rate. At a 20-percent 
rate, continuous corn still has the higher 
accumulated returns at 50 years. Since 
contouring generally reduces soil losses 
by one-half, the period over which more 
intensive rotations remain optimal is ex- 
tended by adopting this practice. 

Soil Loss Tolerance 
vs. Profit Maximization 

To illustrate how income is sacrificed 
by adopting a rotation that satisfies the 
soil loss tolerance, the following rotations 
on 4-percent slopes are taken as an ex- 
ample: continuous corn, C-C-SB-O-M, 
and C-C-O-M-M. Of these, only C-C- 



O-M-M meets the soil loss tolerance of 

3 tons per acre (Table 1). With a 25-year 

planning period and with contouring, the 

plow layers in all soils would still be in 

their Ai horizons. With contouring, the 

A-B horizon (mixture of lower A and 

upper B horizons) is entered after 41 

years with continuous corn, after 105 

years with C-C-SB-O-M, and after 

177 years with C-C-O-M-M. At the end 

of this 25-year period, it is not likely that 

the land market would be sensitive 

enough to pick up differences in the depth 

of the Ax horizon and reflect them in 

land values. 

The present value of the net returns 

at 5-percent discount over the 25-year 

period is as follows: 

Continuous corn $322 

C-C-SB-O-M 285 

C-C-O-M-M 282 

According to these calculations, the 
present value of income sacrificed by 
meeting soil loss tolerance with C-C-O- 
M-M instead of using continuous corn is 
$322 minus $282, or $40 per acre for the 
25 years. 

A similar calculation for 50 years 

shows less relative difference: 

Continuous corn $397 

C-C-SB-O-M 361 

C-C-O-M-M 363 

Under conditions of considerable un- 
certainty about the future, or with capital 
limitations, a higher discount rate may be 
appropriate. With a 20-percent discount 
rate, the 25- and 50-year comparisons are 
as follows: 

25 years 50 years 

Continuous corn $118 $119 

C-C-SB-O-M 102 103 

C-C-O-M-M 100 101 

With such a high discount rate, what 
happens after 25 years is of virtually no 
consequence. 

No attempt is made here to assess the 
importance, as an obstacle to adoption of 
soil conservation plans, of the calculated 



AGRICULTURAL PRICE SUPPORT AND STABILIZATION IN AUSTRALIA 



29 



income losses that would be incurred by 
adopting a plan that is within the accept- 
able soil loss. It could be argued that 
they are quite small when looked at on 
an annual basis. These results do, how- 
ever, differ from the prevailing belief 
that "soil conservation pays" for the in- 
dividual farmer. This, of course, does 
not mean that it is not in the best inter- 



ests of society to keep annual soil losses 
on Swygert soils at 3 tons or less per 
acre. The analysis only suggests that if 
the relationship between soil loss and 
yield is studied in isolation from changes 
in technique of production, a farmer on 
Swygert soils would sacrifice income by 
keeping soil losses at or below the accept- 
able level. 



Methods of Agricultural Price Support 
and Stabilization in Australia 1 



JACK N. 

Favored methods of price sup- 
port give a country's agricultural policy 
much of its distinctive character. The 
role of variable import levies as the 
basic instrument of EEC's common agri- 
cultural policy is one of its outstanding 
specific characteristics. Similarly the 
general use of deficiency payments has 
characterized the United Kingdom's post- 
war agricultural price policy, although 
recently a tendency to depart from this 
pattern has become apparent. 

This article examines the various price 
support methods used in Australia and 
seeks to identify their characteristic be- 
havioral patterns. Its primary purpose is 
to present a classification of currently 
operating price programs for agriculture. 
Description is, however, rounded out by a 
brief review of the formative influences 
shaping the development of Australian 
price policy. 

Basis of Classification 

Classification is sometimes said to be, 
of itself, barren. However, an analyti- 

1 The detailed framework used in this article 
to classify price support measures was devel- 
oped in association with D. A. Muir, University 
of Illinois, Department of Agricultural Eco- 
nomics, whose assistance the author gratefully 
acknowledges. 



LEWIS 

cally oriented classification greatly assists 
our understanding of agricultural pro- 
grams. Too often classifications of price 
support measures are based on the ob- 
jectives or incidental consequences of the 
program rather than on the essentials of 
method. Thus the Haberler Committee 
Report 2 classified methods into three cat- 
egories — those which directly discourage 
imports, those which directly encourage 
exports, and those which directly en- 
courage home production. This classifi- 
cation is inoperable and incomplete. It is 
hard to find a niche in it for all those 
forms of price discrimination other than 
export dumping, and clearly the cate- 
gories are not mutually exclusive. 

At other times classifications bring to 
the forefront the specific institutional ar- 
rangements employed to implement a 
program, while failing to bring out the 
essential operative mechanism (for ex- 
ample, price discrimination between end 
uses of product is included but is listed 
variously as denaturing of foodstuffs, 
marketing orders, etc.). This practice 
can conceal the limited number of real 
alternatives open in price policy. Old 
friends are frequently encountered in the 

'Trends in International Trade. GATT, 
Geneva, pp. 81-82. Oct., 1958. 



30 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



guise of powerful newcomers to the so- 
ciety of price support methods. 

Adoption of a classification matrix, an 
aid to clear thinking on agricultural pro- 
grams, may have important implications 
for the success of comparative studies of 
agricultural policy and of international 
efforts to draw up a code of behavior or 
set of guiding principles for price support 
and stabilization measures. 

The framework adopted here employs 
a tripartite division into measures to con- 
trol or influence supply, measures to in- 
fluence demand, and measures to directly 
augment prices. This is the usual group- 
ing found in American works on agricul- 
tural policy. Within these three categor- 
ies, however, there has been one major 
departure from usual practice. Multiple- 
price programs have been included in the 
supply management category and not 
under the heading of measures influenc- 
ing demand. In consequence a much 
larger than usual proportion of price 
support programs are classed under sup- 
ply management. D. Gale Johnson, 
Rainer Schickele and Dale Hathaway, 
for example, all choose to regard various 
forms of price discrimination as essen- 
tially demand shifters. The apparent ra- 
tionale for this view is that, for a given 
quantity, price realizations are in such 
cases increased by separating and dis- 
criminating between markets. The ag- 
gregate demand schedule, it can there- 
fore be contended, has moved upward 
and to the right. 

It seems more consistent with normal 
usage of the conceptual apparatus of 
supply and demand, however, to consider 
such multiple-price schemes as a form of 
supply control. Their essential function 
is, by discriminatory pricing, to appropri- 
ate for agricultural producers some of 
the consumer surplus formerly existing 
in the now higher-priced market. The 
underlying demand relationships in the 



two or more markets are not necessarily 
changed. Moreover, the implementation 
task is one of controlling the flow of 
supply to separate markets and of pre- 
venting intermarket substitution. 

A Classification of Australia's Programs 

Table 1 shows, for each of a number 
of agricultural commodities in Australia, 
the combination of measures making up 
the present price support or stabilization 
program. 

Some measures not employed in agri- 
cultural pricing in Australia, such as 
buffer stocks and price discrimination by 
income group (food stamp plan) are in- 
cluded in the table. The table is not in- 
tended, however, to give an exhaustive 
enumeration of possible methods. More- 
over, product promotion programs, fi- 
nanced through levies on growers, are 
not tabulated as price support measures. 
The wool industry's promotion campaign 
is the most ambitious of these, and this 
year wool-grower contributions are for 
the first time being supplemented by a 
matching grant from the Commonwealth 
Government. Despite the Wool Board's 
representation of its promotion and ad- 
vertising program as a method of achiev- 
ing reasonable prices to producers, it is 
very doubtful whether such self-imposed 
reductions in producer prices will achieve 
this objective. The wool industry's suc- 
cess in obtaining the government's finan- 
cial assistance may be an important gain 
for the advertising industry, since strong 
pressures for similiar treatment can now 
be expected from other primary products. 

It will be observed from the table that, 
like the United States, Australia has 
made use of most of the cards in the 
agricultural price policy deck and some 
are particularly well thumbed. The dis- 
cernible main patterns and noteworthy 
tendencies are: 

(a) No price supports as such operate 



AGRICULTURAL PRICE SUPPORT AND STABILIZATION IN AUSTRALIA 



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32 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



for products of the pastoral industry 
(wool, beef, mutton and lamb). 

(b) There is a strong predisposition to 
the use of supply diversion programs. 
The home consumption price scheme, in- 
volving price discrimination between do- 
mestic and export markets, is the most 
preferred instrument of price support, 
being employed for wheat, dairy prod- 
ucts, dried vine fruits, sugar, rice, eggs, 
barley, and canned fruits. Multiple-price 
schemes, involving discrimination be- 
tween end uses of the products, are also 
common. They are currently being used 
for milk, sugar, eggs, and peanuts and 
were once applied also to wheat for hu- 
man consumption and livestock feed. 

(c) Import duties and, in a few in- 
stances, quantitative restrictions (for ex- 
ample, an embargo on sugar imports) 
are used in conjunction with home con- 
sumption price programs. These are a 
necessary adjunct serving to keep domes- 
tic and export markets separate, to pre- 
vent reimports and to discourage imports 
which might otherwise be attracted by 
higher price levels on the domestic mar- 
ket. Some tariffs are vestigial. The im- 
port duty of 3d. per bushel on wheat, for 
example, is certainly not currently needed 
to protect the Australian industry's home 
consumption price. 

(d) The buffer- fund or stabilization- 
fund device, by which intertemporal 
transfers of export receipts are effected, 
is employed in the wheat and dried vine 
fruits industry stabilization programs. It 
was also a feature of the first 5-year 
dairy industry stabilization plan adopted 
in 1947. 

(e) In the case of commodities for 
which production is less than domestic 
consumption, there is some partiality to- 
ward measures to induce full purchase of 
the domestic crop without increasing 
landed prices of imports. A good exam- 
ple is the use of concessional import duty 



rates to tobacco and cigarette manufac- 
turers who utilize prescribed minimum 
percentages of Australian leaf. Some- 
what similar devices are used to support 
the prices of linseed and peanuts. 

Historical and Institutional Background 

The most favored method of price 
support — the home consumption price 
scheme — was applied widely during the 
thirties. The case made for this form of 
support for agriculture was reminiscent 
of the campaign to "make the tariff effec- 
tive for agriculture" associated with the 
McNary-Haugen Plan in the U.S.A. It 
was claimed that home consumption price 
programs would compensate primary in- 
dustries for the increases in their costs 
resulting from tariff protection of sec- 
ondary industries. 

There had been a two-price program 
for sugar since World War I when 
Australia's sugar output first exceeded 
domestic consumption. Moreover, an in- 
genious scheme known as the Paterson 
Plan, introduced in 1926, gave the dairy 
industry, in effect, a two-price program. 
Under the Paterson Plan a levy of a 
penny per pound was imposed on all 
factory butter produced, and the pro- 
ceeds were used to pay a subsidy of 
threepence per pound on butter exports. 
(Exports amounted to approximately 
one-third of production at the commence- 
ment of the program.) The result was 
that the domestic price, which had previ- 
ously been at export parity, rose to equal 
the export price plus bounty. By taxing 
itself a penny a pound the Australian 
dairy industry could thus achieve a net 
increase of twopence per pound in aver- 
age returns. 

The benefits of this program were 
rapidly eroded by increased butter pro- 
duction and lower per capita consump- 
tion, which together resulted in a rising 
proportion of exports to total production. 



AGRICULTURAL PRICE SUPPORT AND STABILIZATION IN AUSTRALIA 



33 



There was also some rise in the pro- 
duction of farm butter, which was ex- 
empt from the levy. By 1934 the plan 
had outlived its usefulness. However, 
its initial magic had a powerful appeal 
among Australian primary producers and 
it undoubtedly helped to create the sub- 
sequent predilection for price discrimina- 
tion. 

Another transpacific influence upon 
Australian agricultural policy during the 
interwar period may be observed in the 
development of cooperative marketing. 
Some Australian rural industries adopted 
the slogans and some of the philosophy 
of the Sapiro movement during the 
1920's. When cooperatives proved to 
have fatal flaws as instruments of supply 
control, efforts to patch up these weak- 
nesses led to the development in Queens- 
land of statutory marketing boards. 
Other states followed this example and 
passed legislation providing for the intro- 
duction of compulsory marketing through 
a board. The proposals were subject to 
a referendum and majority approval of 
producers in each industry concerned. 
The powers of government were thus 
to be lent to agricultural industries to 
assist them in implementing "orderly 
marketing" programs. The marketing 
board has become one of the most char- 
acteristic institutions of agricultural mar- 
keting in Australia, typically diverting 
supply to lower-order uses or to export 
in order to increase producer returns. 

In some other respects, however, Aus- 
tralian institutions are distinctly unfavor- 
able to the use of this particular method 
of price support. The division of powers 
in the federal constitution has occasioned 
serious difficulties. Indeed much of the 
history of agricultural policy in Aus- 
tralia would be concerned with the 
frustrations encountered by, and the ex- 
pedients resorted to by, primary pro- 
ducers in their efforts to circumvent 



checks imposed by the constitution and 
to organize for themselves a position of 
monopoly power. The prolonged litiga- 
tion and shifting interpretation of key 
sections of the constitution by the courts, 
the frequent invalidation of programs, 
and the resulting uncertainty as to what 
is practicable have had a major influence 
upon the evolution of agricultural price 
policy. 

Section 92 of the constitution requires 
that interstate trade shall be "absolutely 
free." It is problematical whether, in 
making this provision, the drafters of the 
constitution had in mind anything beyond 
the dismantling of state tariffs upon 
federation. The provision has, however, 
been interpreted by the courts in a way 
which has hampered government and 
producer efforts to achieve the conditions 
necessary for successful supply diversion. 
A producer can usually escape diversion 
of his share of the crop to lower-priced 
outlets by shipping his produce across a 
state border (although in a recent case 
the judgment disallowed the practice of 
sending Queensland eggs on short joy- 
rides across the New South Wales border 
on their way to market, in order to avoid 
control by the marketing board). A 
number of marketing programs have 
collapsed after being undermined by 
evasions of this kind. Others have been 
found to be in violation of Section 92. 

Some programs, notably for dairy 
products and dried vine fruits, have con- 
tinued on a voluntary basis, reinforced 
in the case of the vine fruits by a system 
of licensing packers through state boards. 
There is at least an implied threat that 
noncooperators may be delicensed for 
unsanitary premises or similar offenses. 
This shaky legal basis of home con- 
sumption price schemes in Australia has 
made it easier to establish such programs 
for commodities which are bottlenecked 
through a processing point at some early 



34 



ILLINOIS AGRICULTURAL ECONOMICS, JULY, 1964 



point in the marketing chain. Voluntary 
schemes are much more viable when 
there are limited numbers of processing 
points, such as dairy factories, sugar 
mills, or dried fruit packing houses. 

There are, of course, different methods 
available for equitably sharing the bene- 
fits of a two-price plan among producers. 
In Australia the favored method has 
been to pay producers an equalized price 
(average net realization from all markets 
and end uses). Quotas giving each pro- 
ducer an entitlement to sell a certain 
quantity to the higher-priced outlet have 
been used only in milk marketing within 
the whole milk zones. 

A number of agricultural economists 
have advocated the abandonment of price 
equalization during the last five years and 
have suggested individual quotas or 
home-market participation rights. This 
plan will be recognized by Americans as 
one put forward in rudimentary form 
by W. J. Spillman in 1927 and inde- 
pendently advanced by Beardsly Ruml. 
It was subsequently developed and advo- 
cated by John D. Black and M. L. Wilson 
in the late twenties and early thirties 
under the name of "domestic allotments," 
a name which was later applied to a very 
different measure. A good discussion of 
its advantages over price equalization is 
contained in an article by Brinegar and 
Johnson 3 who also extend the principle 
to other instruments of price support as 
well as two-price schemes. 

The essential difficulty with price 
equalization along the Australian pattern 
is that it creates divergence between 
private and social marginal returns. In- 
dividual farm operators receive and plan 
on the basis of receiving the equalized 
price for additional output, whereas only 
the export price or the return from a 
lower-order use accrues to the industry 

3 G. K. Brinegar and Stewart Johnson, On 
Letting Go of the Bear's Tail. Jour. Farm 
Econ. 36(1) :30-43. Feb., 1954. 



as a whole. Erosion of benefits by in- 
creasing output often ensues. Moreover, 
the difference between the equalized price 
and the industry's marginal return is 
capitalized into land and livestock values. 
As a result alternative enterprises, such 
as forestry or beef production in dairy- 
ing areas, often face inflated factor 
prices which impede land use adjust- 
ments and arbitrarily affect interregional 
competition. 

This problem confronts all rural in- 
dustries employing multiple-price pro- 
grams in Australia except, to some extent, 
sugar, rice, and dried vine fruits where 
some measure of production control is 
feasible. For some of these commodities, 
restrictions on land or water inputs have 
been facilitated until now by the location 
of production primarily within one state 
(as for sugar and rice). This control 
may be more difficult to achieve when 
production of rice and sugarcane is de- 
veloped in Western Australia. 

Formulation and implementation of 
production control programs for Aus- 
tralian agriculture is somewhat compli- 
cated by the constitutional division of 
powers and by the repeated failure of 
efforts towards constitutional amend- 
ment. Powers over production are 
among the residual powers assigned to 
state governments. In order to introduce 
production controls, either in the form 
of marketing quotas or of restrictions on 
inputs, it would be necessary first to 
secure agreement at the Australian Ag- 
ricultural Council and then secure au- 
thority in each state concerned by means 
of complementary or enabling legislation. 

As a result production controls have 
been little used in Australia's agricultural 
price support programs. Indeed it is more 
than a contradiction to describe the mar- 
ket structure for a number of important 
Australian primary products as "atomis- 
tic monopoly." Government powers have 



AGRICULTURAL PRICE SUPPORT AND STABILIZATION IN AUSTRALIA 



35 



been deployed to place producers in a 
position of monopoly power, but deci- 
sions on how much to produce remain in 
the hands of individual producers. Not 
only does the lack of production control 
leave the program open ended, but a mis- 
leading inducement to expand output is 
built into the producers' planning price 
by the price equalization arrangement. 

The consequences have sometimes 
taken a long time to come to a head. 
They caught up with the dairy industry 
several years ago, but the federal gov- 



ernment is persisting with the program 
virtually unchanged. The Australian 
wheat industry has so far escaped the 
ultimate consequences of its price sta- 
bilization program. Perhaps, however, 
only the fortuitous outlets found re- 
cently for large quantities of wheat in 
mainland China and the U.S.S.R. have 
deferred a reckoning and enabled a 
further 5-year extension of a program 
without production controls (and without 
even nullification of production induce- 
ments) to be undertaken in 1963. 



5M— 7-64— 83256 



CONTRIBUTORS 
TO THIS 
ISSUE 




3 Cv 








HAROLD F. BREIMYER, Staff Economist, 
Agricultural Marketing Service, U.S. De- 
partment of Agriculture, was Visiting Pro- 
fessor of Agricultural Economics during the 
1 963-64 academic year. He served as 
Staff Economist, Council of Economic Ad- 
visers of the President of the United States 
from 1959 to 1961. He is presently Vice 
President of the American Farm Economics 
Association. 

N. G. P. KRAUSZ teaches and conducts re- 
search in those phases of agricultural 
economics in which legal aspects are 
dominant. In addition to a general course 
in agricultural law, he teaches a course in 
taxation. His research covers a variety of 
topics including zoning in rural areas, tax- 
ation, inheritance laws, and legal aspects 
of water use in rural areas. 

D. E. LINDSTROM has been a member of 
the College of Agriculture staff since 1929. 
He is a rural sociologist with a special 
interest in rural youth and their education. 
He has spent extended periods in a num- 
ber of foreign countries — Sweden, Japan, 
and India. He recently completed a study 
of Japanese cooperatives. 

C. E. HARSHBARGER, a graduate of the 
University of Illinois, is presently working 
toward his Ph.D. degree at Purdue Uni- 
versity. As an undergraduate student 
trainee with the U.S. Department of Agri- 
culture, he worked on a research project 
dealing with land use. He is co-author of 
a report, "History of Land Use in the 
Watersheds of Reservoirs in the Claypan 
Soils Area of Southern Illinois." 

JACK N. LEWIS is Dean of the Faculty of 
Agricultural Economics, University of New 
England, Armidale, New South Wales, Aus- 
tralia. During the academic year 1963-64 
he was Visiting Professor of Agricultural 
Economics. Prior to joining the staff at the 
University of New England, he was As- 
sistant Secretary in the Australian Depart- 
ment of Trade. 



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